How the Bud­get will aff­fect your chances of buy­ing a home

Yorkshire Post - Property - - PROPERTY -

get-on and pur­chase those homes they can’t quite fi­nance in the cur­rent cli­mate. Called Help to Buy they fall into cat­e­gories: Eq­uity Loan and Mort­gage Guar­an­tee. Government will loan you up to 20 per cent of the value of your new home and in­cen­tivise lenders to make more mort­gages avail­able for peo­ple with smaller de­posits.

The Help to Buy Eq­uity Loan is for new build pur­chases of up to £600,000 and will be on the mar­ket from April 1, 2013. Avail­able for three years, its aim is to ex­pand the First Buy scheme and make avail­able the op­por­tu­nity of pur­chas­ing a new home to all pur­chasers - not just first-time buy­ers.

To qual­ify you will still need a de­posit, which is set at a min­i­mum of five per cent. The Government will then lend you 20 per cent of the value of your new build prop­erty through an eq­uity loan. The loan can be re­paid at any time within 25 years (or the term of the mort­gage), or on sale of the prop­erty. The loan is in­ter­est free for the first five years with a fee of 1.75 per cent from year six which will rise an­nu­ally by RPI in­fla­tion plus one per cent.

This is cer­tainly a great of­fer if you can­not muster a 20 per cent de­posit or more, but please re­mem­ber you still need to se­cure a 75 per cent mort­gage.

Your other op­tion is the Help to Buy Mort­gage Guar­an­tee Scheme. Avail­able from Jan­uary 2014 it is aimed at new build and ex­ist­ing prop­erty pur­chase and will in­crease the avail­abil­ity of mort­gages for peo­ple with small de­posits and sup­port £130bn of high loan to value mort­gages.

Avail­able to ex­ist­ing homeowners as well as first-time buy­ers, the scheme will run for three years and re­quires a de­posit of be­tween five per cent and 20 per cent on a max­i­mum pur­chase price of any­thing up to £600,000.

Un­der this scheme, the Government will pro­vide guar­an­tees to lenders on a pro­por­tion of the mort­gage. If a bor­rower’s prop­erty is re­pos­sessed the Government will cover a pro­por­tion of the losses suf­fered by the lenders, thus low­er­ing the risk for the lender.

As I’m sure you can ap­pre­ci­ate, not enough time has passed since the bud­get for the ini­tia­tive to fil­ter down into a com­mer­cial of­fer­ing. The Government has stated they will be pro­vid­ing fur­ther de­tails on how to get a Help to Buy Guar­an­tee Scheme mort­gage later this year. It seems like we have a few more op­tions to get on and move up the prop­erty lad­der than we did this time last year.

The schemes are aimed at help­ing peo­ple onto and up the prop­erty lad­der, not for in­vestors to take ad­van­tage of a good deal. There­fore cap­i­tal re­pay­ment mort­gages will be the only pay­ment op­tion with in­ter­est only and buy to let un­avail­able.

Be aware that Help to Buy does not au­to­mat­i­cally qual­ify you for a mort­gage and you will still have to fund the re­main­ing loan your­self through a mort­gage.

You will still be sub­ject to your mort­gage lender’s cri­te­ria, credit checks and af­ford­abil­ity cal­cu­la­tors and your home could still be re­pos­sessed if you de­fault on the re­pay­ments.

Although the Government has pledged to fi­nan­cially back both schemes, they will have no con­trol over the in­ter­est rates. Nor do they have con­trol over which lenders will of­fer the schemes and cer­tainly no con­trol over the fi­nal lend­ing de­ci­sions. My ad­vice is stay in touch with an in­de­pen­dent mort­gage ad­vi­sor to stay on top of de­vel­op­ments.

Franz Muehlthaler from Hol­royd Miller Prop­er­ties in as­so­ci­a­tion with Reach 4 Mort­gage So­lu­tions.

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