It is no secret that getting on the property ladder is more difficult than it once was, so making use of schemes such as Help to Buy makes great sense to thousands of first-time buyers.
Kevin Shaw, national sales director at Leaders, is one advocate of the government’s flagship housing policy, which is designed to assist people who have a relatively small deposit in proceeding with their plans to buy a property.
“Help to Buy has provided vital support to thousands of people who might otherwise struggle to secure the finance required to buy a property,” he explains. “It works by allowing buyers to either top up their deposit with a government-funded loan or take out a mortgage with a government guarantee attached.”
Kevin has highlighted some of the key facts about Help to Buy to help prospective buyers work out whether the scheme is right for them:
• The first phase of Help to Buy launched in April 2013 and is open to first-time buyers with a five per cent deposit who wish to buy a new-build property worth up to £600,000
• It offers applicants the chance to secure a loan that allows them to purchase a newly-built property
• To date, about 50,000 people have benefited
• Alternatively, first-time buyers who want to buy a second-hand property can instead obtain a government guarantee that commits Westminster to covering a portion of the losses in the event of foreclosure
• This guarantee encourages lenders to offer good mortgage terms to first-time buyers, as they can be sure of recovering some of their losses from the government should a borrower default on their mortgage
The latest phase of the government scheme will come into effect on 1st December 2015 when the Help to Buy ISA launches, providing first-time buyers with a new and incentivised way to save.
Kevin has looked ahead to the ISA and summarised its key features:
• People will be able to save up to £200 each month in the Help to Buy ISA, with the government adding an extra 25 per cent
• So every individual who puts away £200 will benefit from an additional £50 in their fund each month
• Savers can deposit an additional £1,000 when opening their ISA, allowing them to save £1,200 in the first month - plus the government’s top-up of £300
• The maximum government contribution is £3,000, which will be reached when people have saved £12,000
• Users can put their money towards any type of mortgage or opt to make an early withdrawal, providing the government bonus totals at least £400
• £12 billion has been set aside to support Help to Buy ISA account holders, which could lead to £130 billion worth of mortgages being taken out
“If you are worried about a small deposit and the position this puts you in as a first-time buyer, Help to Buy could be your route to owning a home on reasonable terms,” Kevin says.
For expert advice on Help to Buy and all aspects of buying a property, please contact your local Leaders branch.