If buying a house is one of the proudest achievements of a person’s life then the government’s Help to Buy scheme is making many people pretty proud. According to the latest figures released by Gov.UK more than 54,000 homeowners have been created in England alone since the introduction of the scheme in 2013.
With house prices continuing to rocket the Government faced a problem; how do they give those people who can afford a mortgage and want to take advantage of current low interest rates, but can’t amass the funds needed for a deposit, the chance to clamber onto the housing ladder?
So it stepped in with funds to plug the gap in what is a scheme widely regarded as a great success; the homeowner–to-be needs a 5% deposit, the government lends up to 20%, and whatever is left is still borrowed from a mortgage lender.
It gives the buyer more options in choosing a home (since the lender is only concerned with the money they are lending out) and the government’s equity loan is interest free for five years. Money Advice Service has a guide to those who can benefit from the Help to Buy scheme.
The scheme can be used for those selling up and moving to a second house, but it’s been taken on mainly by people buying their first home – eight out of ten sales went to first time buyers. The Telegraph recently spoke to some new homeowners who benefited from the scheme, and some who didn’t, because there are some potential buyers who will gain no advantage from the scheme. Here are five wannabe-homeowners who may face disappointment.
- People who want a second home
The scheme was designed to help those who want to get on the housing ladder in the first place, not those who want to add extra rungs for themselves. If you’ve paid off your mortgage and want to add a holiday home in Devon or Scotland, or perhaps a property to rent out to bring in some extra income, then this scheme is not for you.
- People who want an interest-only mortgage
An interest-only mortgage is for those who may have an inconsistent and fluctuating income – and unfortunately the Help to Buy Scheme does not extend to them. The minimum requirement is that the buyer pays the interest every month, and any extra off the house should they wish – but this is not mandatory. This means that the monthly payments are far cheaper, but also means that if the loanee never pays any extra they will not own the house at the end of the mortgage spell.
- Those who have no deposit at all
The days of 100% loans for houses are over – at least 5% is needed.
- Those who want to by a house costing more than £600,000 in England, £400,000 in Scotland, and £300,000 in Wales
The clue is in the name of the scheme, as few would suggest people looking for homes of these prices need any help in finding and paying for a property. The Scottish government recently announced that it was cutting the maximum house price under the scheme to £250,000.
- Those who don’t convince the lender
Banks and building societies are more stringent following the Mortgage Market Review earlier this year; you’ll need to show them you are in control of your finances and have a credible strategy for paying back the loan, otherwise you might be refused.