Are you a fully paid up member of Generation Rent (© Halifax)? Are you finding a combination of high property prices, the lenders unwillingness to lend and your boss inexplicably failing to give you that pay rise you deserve a bar to you being able to buy your first property? Well if so, the government’s Help to Buy Scheme (HTB) might be for you.
The HTB scheme was launched in October 2013 and after a bit of a slow burn is starting to take effect. The scheme is available until 2020, and is restricted to bright spanking new–build homes.
So what are the attractions of the HTB scheme? Well, for one, you only need a five per cent deposit, which is a reduction from the usual 10 per cent and which means saving is not as onerous as it might have been.
The generous souls at the Government will provide a further 20 per cent of the purchase price, meaning you have in effect a 25 per cent deposit. The upshot of this 25 per cent deposit is you can obtain more attractive mortgage deals than might have been the case.
Want some good news? Well, for the first five years the government’s loan is interest free, meaning no payments have to be made in this period.
The loan can be paid back at any time, should you wish to do so.
So where’s the catch, you may ask? Well, in year six you will be charged interest on the loan at 1.75 per cent. This percentage will rise by one per cent every year, plus any increase in inflation.
If you decide not to repair the loan during your period of ownership then when you come to sell you will repay the 20 per cent loan to the Government based on the current value/sale price of the dwelling.
This could be quite costly, if prices have risen and if possible, should be factored in when deciding whether to make payments or not.
A couple of small points: The HTP scheme only applies to properties worth up to £600,000 and for those of you thinking of making a fast buck and renting the dwelling out forget it: You cannot obtain a buy to let mortgage in this instance. You also have to satisfy the usual lender criteria of being able to make the monthly payments.
For more information contact Nicholas Smith, head of Residential Property and a Partner at George Ide.
Partner and head of residential property
George Ide, LLP
Solicitors of Chichester and Bognor Regis
Telephone 01243 786668