How do Help to Buy government schemes work?
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My girlfriend and I are currently renting a flat, but we would really like to buy a house and my parents have given us some money towards a deposit. Even with that, we are going to struggle to come up with any more than about 10pc of the purchase price of the type of house we want to buy. It will be our first home together, but I had a mortgage before, so we don’t qualify for any first-time buyer help. What do you suggest?
Diane Fish of Smith & Pinching responds:
First, I must tell you that the current mortgage market is relatively limited and there are very few low deposit mortgages available. You may be able to find a deal but there will be more stringent affordability checks and you may find that rates are not favourable compared to those on offer with a higher deposit. It may be better to simply wait another six to twelve months before buying your home, during which time the market will hopefully find new confidence and more flexible deals may become available, although this of course is not guaranteed.
However, just because you’re not a first-time buyer doesn’t mean that you don’t qualify for some of the Help to Buy schemes currently on offer from the government. Different parts of the UK have different rules, so my guidance below relates to England.
If you are looking to buy a new house, you may be able to apply for a Help to Buy Equity Loan. With this loan, you must find a deposit of 5pc. The government will then lend you up to 20pc (40pc in London) and you must obtain a mortgage for the remainder. The house must be purchased from a registered Help to Buy builder.
You also don’t need to be a first-time buyer to apply for shared ownership of a property. You must be able to demonstrate that you can’t afford to buy the whole property, and the property will normally be purchased through a housing association. You would need a mortgage for your share of the property and pay rent on the share you don’t own. The property would be held on a leasehold basis. With shared ownership, it may be possible to 'staircase' your ownership, buying a larger share of the property over time.
I suggest you speak with an independent mortgage adviser who will help you work out what size of mortgage might be available to you in the current climate.
Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.
For more information visit www.smith-pinching.co.uk
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