Those considering buying a new home were given a boost by the Chancellor, George Osborne, in the budget recently, as he unveiled two new measures to help would-be buyers obtain mortgages.
Osborne announced a £3.5bn fund for government loans to home buyers, and a further £12bn package to improve availability of mortgages to those who are unable to find a large deposit.
The Help to Buy scheme is actually based on two schemes already in existence, and is designed to help both first time buyers, as well as those looking to move up the property ladder.
The scheme enables a home buyer to take out a mortgage worth just 75% of the property’s value, so long as they are able to find a 5% deposit. The remaining 20% will be lent by the government – an ‘equity loan’ that will be interest free for the first 5 years.
It is thought that 74,000 buyers will be helped by the scheme, which will run from 1st April. The move will also boost the construction industry, according to the Chancellor. Other entities, including those providing home and unoccupied property insurance products, utility operators and local councils will also benefit from any resultant increased home ownership.
The new scheme is not as restricted as its previous incarnations, since properties worth up to £600.000 are now eligible, and there is no upper limit on how much a buyer can earn to benefit from the scheme.
Those who take up this offer should be aware that after 5 years, an annual fee of 1.75% will be levied on the ‘equity loan’ debt, which will increase each year in accordance with the retail price index (RPI), plus 1%.
The move, said the Chancellor, has been designed to “to support a new generation in realising the dream of home ownership”.
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