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In this month of October, we have been solely talking about the various Help to Buy schemes available.

The Help to Buy initiative was a way of assisting young first-time buyers acquire their first home. At a time where it almost seemed impossible for the millennial to own a property in the ever changing and increasing property market, the government stepped in to lend a hand.

However, there is a catch. Nothing in life is free and that’s why it is important to know the pros and cons of any scheme you commit to.

These scheme consist of the following:

Help to Buy ISA

Lifetime ISA Post due 29th October

Equity Loan

Shared Ownership

Mortgage Guarantee Scheme Withdrawn November 2016

 

What is a Help to Buy Equity Loan?

 

The Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.

This scheme is available to First-time buyers and Home movers.

For example:

Purchase price: £200,000

Your contribution to the deposit: £10,000

The Governments contribution to the deposit: £40,000

Mortgage Amount: £150,000 75% LTV

You won’t be charged loan fees or interest on the 20% loan for the first five years of owning your home, however you will have to pay £12 management fees each year.

After 5 years, you will have to start paying back the 20% you initially borrowed, plus interest and your monthly Mortgage payments

ALERT

Things to bare in mind:

1. Interest kicks in after five years, and could amount to a chunky sum over time.
2. The Government will take the same percentage of the sale price as you opted for when you took out your equity loan (regardless of how much the loan was originally for) when the property is sold.
3. You can repay part or all of the loan early, but the Government will only accept this if it’s a minimum of 10% of the property’s current value.