After the disastrous credit crunch in 2008, the government brought in some backup to try and kickstart the mortgage market. They introduced ways to help First Time Buyers get onto the property ladder, these were called Help to Buy schemes.
There are a number of different Help to Buy schemes available, you may match with some of them and you may not match with others. Here is a list of the Help to Buy schemes and a couple of other similar schemes that you can access.
The Help to Buy Equity Loan is the most popular scheme. If you are a First Time Buyer in Hull and want to get your mortgage process rolling then this scheme could be for you.
Firstly, you have to be First Time Buyer to access this scheme and have to be purchasing a new-build property too. A minimum of a 5% deposit is also required.
The way this scheme works is that you put down a deposit of 5% or more and then the government loan you rest to make up a total of a 25% deposit. So if you have a 5% deposit they will loan you 20%; if you have a 10% deposit, they will loan you 15%, and so on…
This will leave you with a 75% mortgage and the government equity loan to pay off. You get 5 years to pay off this equity loan interest-free; if you can’t meet the 5-year cut off point, you will start receiving interest on the amount of the loan that is remaining. This interest rate starts at 1.75%.
As a Mortgage Broker in Hull, we know that it can be hard to balance your mortgage payments and the equity loan repayment at the same time. There are ways around this, for example, you can sometimes remortgage to raise capital for this loan, however, doing this will increase your mortgage payments.
The Help to Buy Shared Ownership scheme was introduced to allow applicants to purchase a percentage of a property and then pay the rest back on rent.
The percentage of the property that you own is usually between 25-75%, though not always. The remaining percentage is likely to be owned by the housing association. This share can possibly be increased at a later date, perhaps when you have more money.
The way that your payments work is that you have to pay your mortgage plus your rent. So essentially you are paying 100% of the ground rent and service charge on the property. This is still the case, even if your share is the minimum amount.
The Armed Forces Help to Buy scheme was introduced in 2014 following the success of the Help to Buy Equity Loan scheme. This scheme had the same concept as its predecessor, however, this one targeted members of the armed forces.
If you are you fit into the criteria of the scheme, it could be a great option for you. The government has now extended the deadline/review date of the scheme to December 2022; we are hoping that it stays around as the scheme is a massive help to existing armed forces members who really need that extra help with getting onto the property ladder.
The Lifetime ISA is often a scheme that gets missed. It’s not a go-to scheme, however, it’s still very useful to be aware of it, it can help you secure a property as a First Time Buyer in Hull.
It’s essentially a savings account where your money grows tax-free. The government will also top up your savings by an extra 25%, so if you meet the £4,000 maximum amount, you will receive a nice £1,000 bonus.
You have to pass certain criteria in order to gain access to this scheme, you find all of these details on the Lifetime ISA website.