Rishi Sunak’s second Budget as Chancellor brought two pieces of welcome news for the property sector as the Government attempts to transform “Generation Rent” into “Generation Buy” to help stimulate the UK economy, namely the new 95% Mortgage Guarantee and an extension of the Stamp Duty Holiday.
95% Mortgage Guarantee
The name of this scheme is misleading as not everyone that applies is guaranteed to be offered a mortgage, it is still subject to affordability and credit score. The “guarantee” itself is that the Government will ensure Lenders don’t stand a loss if they grant a 95% mortgage to a customer who then subsequently falls into arrears and is repossessed leaving behind negative equity.
This scheme should in theory give Lenders more confidence to lend even though the applicant only has a smaller deposit to put down. Of course, Lenders never want to repossess someone’s home unless it is the last resort, but if that happens then the new scheme would cover any shortfall.
Lenders have been worried about the prospect of home values decreasing so this measure should alleviate that concern although of course, the chances of negative equity occurring will naturally reduce should property prices increase as a result of these announcements!
The scheme is available to both 1st Time Buyers and Home Movers, it’s available on any property (not just new build) and will run until December 2022. Some major High Street Banks have already signed up to the scheme and it’s likely more will follow later on. It’s still a big challenge for Lenders to cope with the demand they are getting for mortgages due to the difficulties training and supervising staff working from home but they will want to offer as many of these mortgages as they can.
Stamp Duty Holiday Extension
When the Stamp Duty Holiday was launched last year we all hoped life would be very much back to normal by the cut-off date of 31st March 2021 but things didn’t pan out that way as we know. Solicitors are struggling to keep up with the workload and if lots of chains had collapsed then it would have partly defeated the object of the exercise.
Therefore it was good to hear the scheme has been extended to 30th June for purchases up to £500,000 and 30th September for purchases up to £250,000.
The Government certainly sees the property sector as an area that can play a big part in our economic recovery and if you are looking to buy a home or remortgage this year please reach out and we will be happy to advise you.
Whilst it is widely accepted that there is a national housing shortage, the Government has launched several schemes over the years. These have been under the “Help to Buy” banner, designed to get people onto the property ladder.
Unfortunately calling all the schemes Help to Buy has caused confusion amongst consumers! Here’s my take on what’s out there right now.
Schemes Currently Available
Help to Buy Equity Loan
This is the most popular scheme and is available on new build properties only. The government will lend you up to 20% of the purchase price. Usually, my customers put down a 5% deposit and take out a 75% mortgage for the rest. Remember, it’s a loan not a gift and the government have a stake in your new home until you pay them back.
Forces Help to Buy
If you’re in the armed forces, you can borrow up to 50% of your salary, up to a maximum of £25,000 interest-free towards a new home.
Some FAQs about the Help to Buy Schemes
What if I’m Self Employed?
There are lots of options available to you. It’s a good idea to speak to your Accountant and also speak to a mortgage broker for advice.
Do I have to buy a new build house?
Yes and no, the Help to Buy Equity Loan is for new build properties only. The Forces Help to Buy can be on new or old.
Do you need a good credit rating?
There may be options available to you even if you have a poor credit score. Mortgage lenders are becoming increasingly competitive on criteria and many challenger banks are entering the market. Again, please seek mortgage advice from a local expert!
How much deposit do I need?
A minimum of 5% as a rule.
Can my deposit be gifted by my parents?
Yes, family members and sometimes friends can gift (not a loan). This is a popular way for First Time Buyers to get on the property ladder. In a recent government survey, 27% of such buyers relied on family and friends to help with a deposit.
Do I need to pay the government back?
Yes, with the Help to Buy Equity Scheme the Government loan is interest-free for 5 years. After this, you’ll pay fees. Hopefully, the property will have increased in value and you can potentially remortgage the property at any time. This likely would be to raise funds to increase your share. Remember, the government will also receive their share of any profit made.
Is Help to Buy just for first-time buyers?
The Help to Buy Equity Loan is only available for First Time Buyers, however, the Forces Help to Buy can be accessed by both First Time Buyers and Home Movers.
How do I use the Help to Buy Scheme?
The first stage would be to have a free mortgage consultation. This is to work out your maximum borrowing and also to get a mortgage agreement in principle certificate. This puts you in a strong position to make an offer. Once you have this in place you’ll be a “qualified buyer”, the next step is to go and view houses!
For more information and further terms and conditions about any of the above schemes please refer to the ownyourhome.gov.uk website.
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