At the beginning of 2013 rising property prices meant saving the 20% deposit required to purchase a dream home was a daunting task for many first time buyers. As a result a growing number of young people were frozen out and had no option but continue to live at home with parents or fork out on rent.
One year on and the government’s Help to Buy scheme has managed to breathe some life back into the market by enabling first time buyers to gain a footing on the property ladder.
The scheme allows you to pay just 5% for the deposit and the government offers support through an equity loan worth 20%. You will be able to get a mortgage on the remaining 75%.
Not only does Help to Buy secure your new home with a significantly lower deposit, but the 75% mortgage means you will also benefit from reduced monthly payments. This popular initiative appears to be gathering pace as house sales increased dramatically from 2,133 in November 2013 to 3,410 in December of the same year.
The loan is interest free for the first five years. On the sixth year you pay an admin fee of 1.75%, which will increase every year in accordance with the Retail Prices Index plus 1%. The house will be under your name, so you can sell whenever you want. You can repay the loan back after 25 years, when you sell the house or when the mortgage period runs out. It is also possible to pay back the loan early in instalments of 10% or 20% of the total value.
Help to Buy equity loans are also available to home movers on new-build homes as well as first time buyers. To qualify you need to have the 5% deposit and be looking to purchase a home valued at £600,000 or less.
At Strata we embrace Help to Buy, allowing us to hand over more keys to young couples so they can begin their new life together. All our new homes are available under Help to Buy. Our financial advisors will talk you through the process and, once you are ready to make a purchase, all you need to do is put down a 5% deposit. We will then contact one of our recommended mortgage advisors who work closely with the local HomeBuy agent. They will be able to confirm your eligibility and find the right mortgage to suit you.
To show how a Help to Buy scheme works at Strata, here is an example based on a two bedroom Opal home in the Dominion development, Doncaster:
Total price: £119,950
Your 5% deposit: £5,998
20% equity loan: £23,990
75% mortgage required: £89,962