Why first-time buyers should act now on the government’s Help-to-Buy scheme

Why first-time buyers should act now if they want to take advantage of the government’s Help-to-Buy scheme, says Gloucester-based mortgage broker The Mortgage Brain

The government backed equity loan Help-to-Buy scheme allows first-time-buyers to buy without a large deposit, but only until March 2023.

The Help-to-Buy scheme has helped many first-time buyers get onto the property ladder in Gloucestershire and The Mortgage Brain in Gloucester hopes to help more do the same.

With the government’s Help-to-Buy scheme coming to an end in March 2023 and new homes taking up to one year to build, first-time buyers will need to get in quick.
SoGlos spoke to Rupert Swetman, head of mortgages at The Mortgage Brain in Gloucester to find out how the scheme can turn 5% deposits into 25% deposits.

Rupert Swetman is Head of Mortgages at The Mortgage Brain. Thriving on building relationships with customers, he understands the benefits of creating a smooth and efficient journey for mortgage applications.
The Mortgage Brain has over 30 years’ experience helping customers find the best mortgage. Its unique Mortgage Search System is continually updated with the latest offers from the widest range of lenders, allowing advisor to rapidly locate the best deal to suit a client’s individual circumstances – and wherever they are on the ladder.
For more information, call The Mortgage Brain on 0333 340 8888 or visit www.themortgagebrain.net.

How does the Help-to-Buy scheme work for first-time buyers and how much can you borrow?

Help to Buy is only available for first time buyers purchasing a new-build property; the housebuilder will need to be registered for Help-to-Buy by the Homes and Communities Agency and their authorisation code will be included on their marketing material.

The government will lend up to 20% (or 40% in London) of the value of a new build home through an equity loan, which is a second loan on your property, in addition to the mortgage.

The buyer contributes a deposit of their own of between 5 and 20 per cent, then the Help to Buy scheme increases that deposit up to 25 per cent, which leaves the buyer needing a mortgage for 75% of the property value. For example if you buy a property for £250,000 with a 5% deposit of £12,500, the government will make up the deposit to 25% with a 20% equity loan of £50,000. So you would then need to get a mortgage for 75% of the value of the property £187,500. [NB it will be a joint mortgage based on joint incomes you don’t borrow separately.]

You can buy a property with Help-to-Buy with a maximum purchase price cap of £349,000 in the South West and £255,600 in the West Midlands; there are other regional price caps in place in England including up to £600,000 in London.

Who can access this scheme and how long is it open for?

Help-to-Buy is available to first-time buyers only, who must not own a home now or have owned one in the past in the UK or abroad, or had any form of Sharia mortgage finance. The current Help-to-Buy scheme ends in March 2023, so anyone hoping to use it should reserve a home as soon as possible – you will need to complete the purchase before next year’s deadline and at present, properties are taking up to a year to be built.

What does it cost and how much do you have to earn to be considered?

The government equity loan is interest free for the first five years. A fee of 1.75% is charged from year six, rising annually by RPI inflation, plus 1%.
The equity loan can be repaid at any time within 25 years (or the term of the mortgage), or on sale of the property, when the initial loan is repaid, plus a proportion of any growth in the property value. Eg. if the property goes up in value by 2% and you have an equity loan of 20% you will have to pay back 20% of the new purchase price – so more than you borrowed. If the property is worth less you will pay back 20% of the lower value so you will pay back less. There is no household annual income limit to access the scheme.

How can The Mortgage Brain help with buying a new build home?

Our specialist new build homes mortgage team works with all the UK’s leading house builders and if you’re referred by them directly to us you won’t pay any arrangement fees. Once we process your mortgage application, we handle everything for you through to completion, and we’re available seven days a week to make sure you meet any timescales agreed with the developer.

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