The Second Part of the Help to Buy Scheme… The Mortgage Guarantee.
The terms of the second part of the Help to Buy Scheme have
been reviled at the end of July. George Osborne launched the second part of the
scheme in a meeting with lenders and house builders. The scheme will guarantee
a percentage of the mortgage on a property new or existing up to the value of
£600,000. There have been warnings that it may push up house prices and
encourage buyers to take out larger mortgages than they would usually afford.
George Osborne has responded to these negativities saying
that there will be strict checks required to qualify for the scheme. Buyers
will not be allowed to purchase property as a second home on the scheme and
will be required to sign a declaration to agree to this, strict income checks
will also be applicable to ensure the buyer can afford the mortgage. Individuals
who have any issues on their credit records will not qualify.
The aim of the scheme is to help people buy a property with
a much smaller deposit. The government scheme will offer to guarantee a
percentage of the mortgage with the lender which will add security and cover a
portion of costs if the buyer became bankrupt or the home was repossessed.
The first part of the Help to Buy Scheme has already proved
to be a hit with buyers. It allows buyers to purchase a new build property with
an equity loan of up to 25% regarding they have at least a 5% deposit, permitting
the buyer to secure a lower mortgage with a lower Loan to Value and therefore
in most cases a lower interest rate.
In comparison the mortgage guarantee part of the scheme will
provide a guarantee to the lender on a portion of the mortgage meaning if the
property was repossessed the government would cover a portion of the lenders
losses. The scheme will run for 3 years
and lenders will be required to pay a fee for the guarantee scheme, the amount
is yet to be revealed but it has been stated that it will depending on the loan
to value. The aim is to encourage as many lenders as possible to use the
scheme.
