HELP TOWARDS HOME OWNERSHIP
8th October, 2013
The Government’s mortgage guarantee scheme is now being rolled out – three months earlier than planned.
Although the scheme will only start in January 2014 people will now be able to start applying for the new mortgage guarantee.
Several high street banks will be offering the new Help to Buy mortgages to customers, ranging from 80 to 95 per cent of the property’s value.
The mortgages – backed by the government – will help thousands of people buy new or existing homes up to a maximum value of £600,000.
Buyers would only need a 5 per cent deposit. The government and the bank jointly guarantee up to the next 15 per cent of the property’s value, in return for a fee paid for by the lender.
Only repayment mortgages will be offered under the scheme. Interest-only or self-certified mortgages are not included.
There will be tough checks to make sure buyers can afford their mortgage payments and the borrowers income will be verified. The new mortgages will not be available to people with a history of difficulties making debt repayments.
The Ministry of Defence has also announced a new Help to Buy scheme for the Armed Forces. The Forces Help to Buy scheme will start on 1 April 2014 and will allow service personnel to borrow up to 50% of their salary (up to a maximum of £25,000), interest-free, to help them to buy their first home.
HELP TO BUY
Help to Buy is the brand for the government funded initiative of affordable home ownership schemes. HomeBuy is the umbrella brand for affordable ownerships designed to help households who would otherwise be unable to purchase an appropriate home. There are a number of government backed affordable housing schemes funded via the Homes and Communities Agency (HCA). Shared ownership and Equity loan products assist priority groups and other first time buyers get on the property ladder. Applicants wishing to benefit from any of the schemes will have to meet the relevant criteria.
HCA has a network of local HomeBuy agents providing coverage across England including London which serves as a one stop shop for potential buyers guiding them through the options available through Help to Buy and explain the eligibility and affordability criteria. There is only one application form to complete for access to all HCA funded products.
Priority is granted in the following order:-
• Existing social tenants and serving military personnel
• Locally determined priorities set by local authorities
• Other first time buyers who fit all other criteria
• To be eligible for all government funded homes available through Help to Buy:
• Your household income must be under £60,000 per year (in London £66,000 for 1 to 2 bed and £80,000 for a 3+ bed property).
• You must also be able to demonstrate that you do not have adverse credit history and can afford to sustain the costs involved in buying or renting a home.
• You must show that you are not in mortgage or rent arrears, or in breach of your current tenancy agreement at the time of application.
• You cannot afford to buy a property that meets your current housing needs without assistance through Help to Buy.
Over the years several scheme names have been used (i.e. part buy/part rent) but the current Help to Buy schemes are ‘Equity Loans’ and ‘Shared Ownership’.
Shared Ownership a part buy part rent scheme where you purchase a share and pay a reduced rent on the remaining percentage. Shares are available between 25%-75% and an applicant’s income determines their share.
Existing scheme names include:
• New Build HomeBuy
• HomeBuy NewBuild
• NewBuild HomeBuy
• SOFTE (shared ownership for the elderly) now OPSO
• Key Worker Living – shared ownership
• Social HomeBuy
• OPSO (older people’s shared ownership).
If you own a home, including one bought through shared ownership or a home ownership product designed for key workers, you are not eligible for assistance through government-funded products except in very exceptional circumstances.
You must have savings or access to at least £4,000 to cover the costs of buying a home. In addition to this amount the mortgage lender is likely to require a minimum 5% – 10% deposit of any share depending on the option chosen.
Equity Loan Schemes
The term equity loan describes any scheme where the purchaser holds the full title of the property but receives assistance through an equity loan which is secured as a second charge on the property.
Existing scheme names include:
• HomeBuy Direct
• First Time Buyers Initiative
• Open market HomeBuy
• Own Home
• Expanded Open Market HomeBuy
• GLO Open Market
• London Wide Initiative
• Key Worker living Open market HomeBuy.
Help to Buy equity loans are open to all buyers seeking a new build home.
Help to Buy buyers must be able to fund up to 80% of their selected property through a conventional mortgage.
Buyers must take out a first charge mortgage with a qualifying lender. The maximum purchase price is £600,000.
You must have access to a minimum 5% deposit (if one is required by your first charge lender).
There is no maximum income criteria.
The property purchased must be the only residence. You cannot rent out an existing home and buy a second home through Help to Buy.
HELP TO BUY – THE MORTGAGE GUARANTEE
• Loans of up to 95% of the value of a property will effectively be underwritten by the government
• Borrowers will have to put down a deposit of between 5% and 20% to qualify
• Help will be available to first-time buyers and homeowners wanting to trade up
• It will apply UK-wide and there are no income-restrictions on eligibility
• It will apply to house sales of less than £600,000
• It will run for three years from January 2014
• It will support £130bn worth of mortgages and help an estimated 644,000 people
• The government has not yet said what it will charge lenders to use the guarantee
More information on the schemes can found on the Homes & Communities Agency and Help to Buy (Home Buy) websites.
We take a look at High Hedges and making an application to the local council if they become a problem.
For further information please contact:
Stephanie Brayshay, Solicitor, on 01244 405417 or email [email protected]
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