Please find below some details on the Help to Buy Scheme that Government has issued today.
John Stewart, Director of Economic Affiars
HTB: Factsheet for Builders
At this year’s Budget, the Government announced Help to Buy, a package of measures to get low deposit mortgages to credit-worthy households and stimulate housebuilding.
Help to Buy is not available for second homes, buy to let purchases or for homes with a purchase price of more than £600,000. There are two parts to the scheme.
The Help to Buy: equity loan provides a government loan of up to 20% of the sale price of a new build property. This means that a buyer can get a 75% mortgage with only a 5% deposit. The scheme is accessed through housebuilders.
The equity loan scheme started on 1 April 2013
It is available on new build properties in England.
Housebuilders will refer buyers to an independent financial advisor (to source the mortgage)
and a HomeBuy agent (to organise the government loan)
The loan costs nothing for the first 5 years. Afterwards, the buyer has to make regular fee payments. These do not repay the loan; they cover the costs to the government of providing the loan.
The buyer must repay the loan when they sell their house or when their original mortgage term ends – whichever is sooner, but the repayment will be up to 20% of the current value of their house not the original loan amount.
The Help to Buy: mortgage guarantee is a government guarantee to lenders so that more high loan to value mortgages (80-95%) will be available on the high street. Participating banks and building societies can start making guaranteed loans to home buyers in October 2013, three months ahead of schedule.
These new mortgages will work like any normal house loan. You apply for one through participating banks and building societies or through a mortgage broker.
It is available for both new build and existing properties across the UK
The guarantee protects the lender rather than the borrower against losses. Borrowers remain fully responsible for their mortgage payments and any shortfall in the normal way.
Lenders are not fully protected. The guarantee only covers a portion of the loan to ensure that the lender keeps some of the risk.
Lenders will pay Government a commercial fee for each mortgage that they guarantee, which covers the expected cost of the scheme for the taxpayer.
Mortgages lent under the scheme will be subject to the lenders normal checks and criteria, as well as specific scheme requirements to ensure responsible lending.
The scheme will run for three years.
How is it that borrowers can get Help to Buy mortgages early?
The Help to Buy: mortgage scheme will provide guarantees to lenders from January 2014, but borrowers can start to apply for mortgages benefitting from the scheme in advance of that.
Government has finalised the details of the scheme. This means that any lender that wishes to sign up to the scheme can start selling mortgages that meet the scheme rules.
This means borrowers will be able to access mortgages supported by the scheme three months earlier than planned.
Although lenders can start providing these mortgages now, the Government’s guarantee won’t be in place until January. But mortgages will be able to complete before January; the lender will put them into the scheme once the guarantee is in place.
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