In the aftermath of the credit crunch back in 2008, the government decided to bring in a back-up, in a bid to try and give a boost to the mortgage market once again.
They introduced new methods of helping first time buyers find their footing on the property ladder, with these being called Help to Buy Mortgage Schemes.
There are a wide variety of different Help to Buy Schemes available. Some of those you may match up with, whilst others may not be right for you.
Here we have compiled a list of the Help to Buy Schemes available, with a few more government schemes that could be useful for you.
The Help to Buy Equity Loan is the most commonly heard of and by far the most popular of the schemes. If you are an inexperienced first time buyer in Sunderland and are looking for a boost to get the ball rolling on your mortgage process, this could be the mortgage scheme for you.
Let’s look at the facts. First of all, to access this scheme, you have to be first time buyer and be buying a new-build property, not an older property. You will also be required to have a minimum of a 5% deposit.
For this scheme to work, you’ll have to put down that 5% deposit you have saved up, potentially more if you have the ability to do so. From that point, the government will provide you with a loan of up to 20%, giving a total of a 25% deposit.
This always works within the 25% total, so if you have put down a 5% deposit, you will receive a loan of 20%. If you are able to save more and put down a 10% deposit, they will loan you an additional 15%. It depends on the amount you’re putting down up front.
Overall you’ll be left with a 75% mortgage to pay off, as well as the government equity loan to pay off as well. You’ll get a maximum of 5 years to pay off this equity loan without any added interest.
If you aren’t able to pay it off by the 5-year cut off point, interest will start building up on the amount of the loan that is left for you to pay off. This interest rate will start at 1.75%.
As a trusted and knowledgeable mortgage broker in Sunderland, we know that balancing between your mortgage payments and the equity loan payments can be quite a difficult task.
There are ways that you can get around this. As an example of this, sometimes you may be able to remortgage as a means of raising capital for this loan, however, this will also increase your monthly mortgage payments.
The Help to Buy Shared Ownership Scheme was introduced as a means of allowing applicants to purchase a percentage of a property they’ve had their eyes on and then pay back the rest as monthly rent payments.
The percentage amount of the property that you will generally own has to be between 25-75%, though on some properties this can potentially be 10%.
The remaining percentage will probably be owned by the local council or housing association. When you have more disposable income, you may be able to increase the amount you own at a later date.
The way that your payments work is that you be paying a monthly rental cost alongside your mortgage. So you’ll basically be paying 100% of the ground rent and service charges that are on the property. This will still apply, even if your share is the minimum amount.
The Armed Forces Help to Buy Scheme was brought into the mortgage world back in 2014, hot on the heels of the Help to Buy Equity Loan Scheme.
This scheme had a similar concept, though was focused on one target market, that being members of the armed forces looking for assistance in obtaining a mortgage.
If you happen to be a right fit for the criteria of this scheme, then it could be a great option for you. The government has now extended the deadline/review date of the Armed Forces Help to Buy Scheme all the way back to December 2022.
We are really hoping that it stays around, as the scheme is a such a helpful tool for existing armed forces members who need that extra financial boost to find their footing on the property ladder.
The Lifetime ISA is often a scheme that people leave out of the conversation. Whilst granted, it’s not a go-to scheme for everyone, it’s still very useful to have some initial knowledge on it as it could be a difference maker in helping you secure a property as a first time buyer in Sunderland.
A Lifetime ISA is pretty much a savings account where your money can grow tax-free. The government will also give a top-up to your savings by an additional 25%. This means that if you meet the £4,000 maximum amount, you will find yourself with a nice £1,000 bonus.
You will have to pass certain criteria in order to be able to utilise the Lifetime ISA Scheme. All the necessary information can be found on the government Lifetime ISA website.