Why you need OUR help with Help to Buy
HOPEFUL first-time buyers will not be short of support if they try to get on the housing ladder for the first time this spring. For the Government is now backing not one, not two but THREE quite different Help to Buy schemes to try to bring the first rung of the ladder a little closer.
Unfortunately, the confusing nature of the growing Help to Buy world means some of the schemes may be far more effective than others – and it can be hard to work out which, if any, to use. Here is the latest state of play.
1 VERSION ONE
THE Government’s first big idea was to help people who could only manage to save a small deposit buy a brand new home from a builder or developer. The scheme was due to be pulled in 2016 but is now likely to be on offer until 2020.
Experts say the scheme has attractions but it remains the most complex of the trio.
Use it and you only need to find a five per cent deposit for your new flat or house. The Government provides a further loan for up to 20 per cent of the purchase price – interest-free for the first five years. So, armed with a combined total deposit of 25 per cent, you only need to get a mortgage for the remaining 75 per cent of the purchase price.
Your developer, or builder, should point you towards local Help to Buy agents who can explain the financial details and there is information at website helptobuy.org.uk.
Lenders offering mortgages include big names such as Barclays, Halifax, NatWest, Nationwide Building Society and Santander as well as several smaller building societies.
Interest rates can be surprisingly low and you can normally choose between a variety of deals including two or five-year fixed-rate loans. Nationwide’s deals are currently the cheapest over most time periods.
When the five-year interest-free period on your Government-provided loan ends you will start paying interest on it. Payments start at 1.75 per cent of the loan amount each year and will rise over time. Finally, if you do not repay the Government cash you will have to pay it back when you sell.
Collect 20 per cent of the purchase price at the start and you will have to repay 20 per cent of the sale price when you move.
2 MARK TWO
THIS was designed to offer help to people buying existing rather than just newly built homes. Again you can buy with a five per cent deposit and behind the scenes the Government agrees to protect lenders if borrowers default on their loans. This has encouraged lenders to charge low deposit buyers a little bit less than they would normally do.
More lenders are offering deals in this version of Help to Buy, so you should have more choice of mortgage. Rates do vary widely so shopping around is essential.
As well as Barclays, Halifax, NatWest and Nationwide, deals are available from the Post Office, Virgin Money, Bank of Scotland and Bank of Ireland.
Aaron Strutt, mortgage expert at London-based Trinity Financial, tips the Post Office and Nationwide for today’s best Help to Buy ‘mark two’ deals.
3 TYPE THREE
THE latest incarnation of the Help to Buy scheme was introduced in this month’s Budget. It is aimed at people who are still saving for a deposit. Sign up when the scheme goes live in the autumn and you will get a new tax-free Help to Buy Isa that will be topped up with Government cash if you use it to buy your first home. The plan is for £50 to be added to every £200 saved, with a maximum payout of £3,000 to people salting away £12,000. Couples buying together can both have a Help to Buy Isa so could potentially get £6,000 of Government cash to help buy their first home. Terms and conditions will apply – so keep reading The Mail on Sunday as the launch date approaches later in the year.
ALTERNATIVES
THE big alternative is not to use Help to Buy at all. If you can pull together a 10 per cent deposit you should be able to shop around and find a good mortgage. Use an independent low-cost or no-fee mortgage broker.
Nationwide has some of the best rates and low fee deals for first-time buyers. HSBC and The Co-operative Bank have eye-catchingly low rates if you can put 10 per cent down, though they charge high fees. Chelsea Building Society, Clydesdale Bank and Santander are also worth looking at.