Help to buy with an equity loan
The government has again made its stance clear on helping first time buyers get on the property ladder with the assistance of an equity loan. This scheme gives first time buyers a real chance to own their own property. The scheme is available on most new build properties and came into force in April of this year. The scheme helps first time buyers gain a mortgage with as little as a 5 % deposit as the government offer to loan an additional 20 % of the property value to assist the purchase.
The equity loan scheme is paid back the same way any other loan is with monthly repayments. In order to ease the strain, the equity loan is interest free for the first five years of the lending but thereafter interest will be charged. The loan is available to anyone with a good credit history, is in full time employment, can afford to make the required mortgage repayments and has a minimum of a 5 % deposit. Based on a 5 % deposit and a government loan of 20 % you would be looking at a mortgage of around 75 % on a value of £100,000.
The one possible shortfall with this scheme is that people will either not have the cash needed to fund a deposit or they will be unable to find a property within the mortgage bracket they can achieve. The government has insisted that this is not likely to happen and that it should help a large amount of first time buyers to get a foothold on the property ladder. However, with a national house price average of up to £240,000 it does seem a little unrealistic that there are many £100,000 properties out there. The scheme is currently only available in England is also only available on new build houses.
As well as the equity loan scheme the government will also be introducing a guaranteed mortgage scheme in 2014. The government is intending to guarantee up to 12 billion pounds in mortgages which they believe will help all first time buyers to achieve a property no matter how small their deposit. According to the Prime minister, mortgage gurus such as the Halifax, Nationwide and Natwest are in support of the schemes and will be offering them to potential customers. If you are considering taking advantage of one of these schemes then be sure to research your options first so that you make the right choice for you.