There are several assistance schemes available to help with buying residential property - the most popular are listed below.
Help to Buy Scheme
Help to Buy is a government programme, created to boost the property market but also help people to get onto the property ladder.
Applicants can apply for financial support to invest in a new-build property, provided they have a 5% deposit available. Help to Buy offers a 20% equity loan, with the homebuyer needing to secure a mortgage for the remaining 75%.
Rates on Help to Buy mortgages are lower since the lender is accepting a lower risk profile. The equity loan is interest-free for the first five years.
After year five, interest begins to be charged, with the rates starting at 1.75%. The interest charge increases each year, based on the Retail Price Index (RPI), plus 1%.
In essence, Help to Buy makes a mortgage more affordable and helps applicants without a large deposit find competitive lending.
New Buy Initiative
New Buy only applies to new-build homes, and similarly to Help to Buy, the borrower needs to put up a 5% deposit. The New Buy mortgage then finances the remaining 95%.
The scheme helps support buyers with a small deposit. The government backs new Buy mortgages up to 20% of the value, which means that the lender has more security, and can offer lower interest rates.
Having government security against 20% of the mortgage means that, were the property to be repossessed, that 20% would be assured, and the lender would need to recoup the 75% balance from the sale of the property.
Right to Buy Programme
Right to Buy is a programme whereby tenants in social housing or council housing can buy their home from the local authority, usually at highly competitive terms when compared to the open market.
Shared Ownership Options
Shared ownership has grown in popularity as new buyers find it increasingly difficult to get on the property ladder. Usually, the property is owned by an employer, housing agency or social landlord.
Buyers can purchase from 25% of the property up to 100%, which is financed through a mortgage. If you are buying a proportion of your home, you still pay rent on the ratio that is owned by your landlord.
There are lots of ways to use shared ownership to increase your equity, so give us a call for more information about how to use this option.
