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Help to Buy – A good or bad idea?

Posted 29/10/2013

The governments first phase help to buy scheme received a mixed response across the media and the public alike. With its early unveiling of phase two enabling more and more buyers to take advantage of a low deposit, low interest rates and slowly rising house prices what effect will this have on the property market now and in the future?  

Help to buy equity loan- phase 1

Buying a New Build property was the only option under this scheme but recent figures are showing that 15,000 plus buyers have now signed up and are now proud to call themselves home owners – despite being in debt up to their ears!  Not sure we are convinced this will be the answer to the current problems in the property market but as Building Surveyors with a vested interest in all property matters we will keep an open mind! 

 

This is how the scheme works

As said this phase of the scheme only applies to new build homes and the idea behind it is that it will help both first time buyers get to on the property ladder and home-owners who want to move up the ladder. In the case of many 1st time buyers this may be their only way of buying a property as with typical deposits of 20% required on many properties buying a house could mean years and years of saving.

Who pays what?

  1. The buyer needs to be able to provide a 5% deposit
  2. The buyer needs to obtain a mortgage for 75% of the value of the property
  3. The government provides the remaining 20% via a loan that is interest free for 5 years.

Obviously the government is not doing this out of the goodness of its heart – at the end of the five years or sooner if the house is sold the interest needs to be paid back. This is what concerns many people! Will buyers who may have stretched themselves financially to buy a property with a low deposit find that they are unable to afford the extra cost of the loan, especially if mortgage rates have increased as well by then?

    

 

 

 

 

 

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