This year has been a pivotal turning point for many...
Help to Buy phase 2 offers new hope for first time buyers…
The second phase of the government initiative has helped more than 70,000 people buy their first home in the past year.
What is Help to Buy?
Help to buy is a government-backed scheme that helps customers with small deposits to qualify for loans on new-build properties with a value of up to £600,000.
The scheme, which gives first time buyers the opportunity to secure a home with a deposit as low as 5pc, launched its second phase late in 2013 and has given new hope to first time buyers who would otherwise struggle to get on the property ladder.
According to the Mortgage Advice Bureau, the average ‘Help to Buy 2’ buyer was 31 years old, that’s 6 years younger than the UK national average for first time buyers. The average salary of borrowers using the Help to Buy mortgage guarantee fell by 12pc over the past year from £31,270 to £27,957. This lower average wage is in contrast to the rest of the mortgage market where the average salary of borrowers increased slightly towards the end of 2014.
The statistics from the Mortgage Advice Bureau will give potential borrowers confidence in the scheme. This, combined with new research from the Halifax bank highlighting that first time buyers are potentially £742 a year better off than those who rent, may persuade prospective first time buyers sat on the fence to dive in and take the plunge. But what are the possible risks that should be anticipated?
Anyone considering Help to Buy 2 should be aware that using the scheme will possibly cost more in the long run. Just how much more will depend on the size of your deposit and length of repayment term.
One of the biggest risks associated with Help to Buy 2 is a rise in interest rates which could put a strain on the monthly outgoings of many households later down the line. Lenders say that applicants will need to demonstrate a positive credit history and a certain level of income to cover current and future mortgage repayments, so be prepared to discuss your income and spending habits during the application process.
Overall, borrowers are encouraged to only use Help to Buy 2 if they are struggling to raise over a 5% deposit and have no other way of raising the money. The scheme is particularly good for long term renters who don’t have the cash flow to save a hefty deposit because a large portion of their incomings is assigned to rent.
What are the requirements?
- You will need a minimum of 5% deposit to qualify
- The scheme is available to first time buyers and home movers
- You can only use the scheme if you are going to live in the property, not if you intend on renting it out
- The scheme is applicable on new-build homes in England to the value of £600,000. You also need to ensure that the property is included within the scheme
- There is no annual income limit in place
- You must have a permanent right to reside in the UK
- You can’t own another property
Help to Buy 2 offers an alternative route for lower earners and long term renters to get their foot onto the property ladder. The average participant of the scheme is significantly younger than the national market average giving new hope to people in their 20s and 30s who are eager to own their own home. Like any financial decision, there are pros and cons to consider before committing long term and what might work successfully for some cases will not be the right thing for others. This is where an experienced team of mortgage advisors such as Expedite Finance can help.
Are you a first time buyer looking to get on the property ladder this year? Contact the team at Expedite today on 0800 2012 100 to discuss your options.
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