Help to Buy scheme: is it for you?

Having problems getting on the property ladder? The government thinks the second stage of its Help to Buy scheme can help. But what exactly is it all about and why is it caused controversy?

help to buy_2

What are the Help to Buy schemes all about?

Help to Buy has been around for a while, but it’s this new stage has caused a kerfuffle. Both schemes allow homeowners to buy a home with only a 5 per cent deposit on a home worth up to £600,000 but they differ in other respects.

What was the first stage of Help to Buy?

The first stage of Help to Buy was a scheme offering equity loans (see picture above) and was available only on new build properties. The government lends borrowers up to 20 per cent of their mortgage as a deposit. This loan is interest-free for the first five years.

What’s changed?

Well, nothing’s changed. You can still take advantage of the Help to Buy Equity Loan scheme. This second stage is for people looking to buy a home that’s either new or old and offers mortgage guarantees instead of equity loans. You’ll still need to find a mortgage, but the government will guarantee up to 15 per cent of your mortgage. This means lenders are more willing to give mortgages to people with small deposits as it carry much less risk, so it should create much more choice for borrowers.

It needn’t be the first home you’ve ever bought, but it should be your main home that you live in most of the time – meaning you can’t use the scheme to help fund a buy-to-let property.

Why does the government think it’s necessary?

The government’s clearly quite excited about it all, as David Cameron chose the start of the Conservative party conference to reveal the initiative. He told the BBC he thinks it’s needed because: “As prime minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed.” And: “If we don’t do this it will only be people with rich parents to help them who can get on the housing ladder – that is not fair, it is not right.”

Indeed! So, why is it controversial?

Labour is worried that the new plans will lead to a new housing bubble, with shadow chancellor Ed Balls warning of “soaring prices” as homeowners will opt for houses they couldn’t previously afford, which would ultimately make it harder rather than easier for first-time buyers to get on the property ladder.

Has it been pushed through to launch early?

Not exactly. The government has announced the plans earlier than expected and you’ll be able to get your house-buying ball rolling, but the actual Help to Buy mortgage guarantees won’t be launched in January 2014.

I think I may be able to take advantage of this. What should I do?

Speak to a mortgage adviser. They’ll be able to advise which solution is right for you and your situation. You can search for an independent mortgage adviser in your budget and area by using the unbiased.co.uk search tool.
________________________________________________________________________

Read more…