Unsure whether to use Help to Buy or save for a larger deposit?
Are you a first time buyer eager to get that first step onto
the property ladder? Or even an existing homeowner needing to move to a larger
home? If you are I am sure you have heard all about the Help to Buy Scheme.
There are 2 parts to the Help to Buy Scheme, the first part
is available to existing homeowners and first time buyers but only applies to
new build property. The buyer is required to raise a 5% deposit then government
will supply up to a 20% interest free (for the first 5 years) loan enabling the
buyer to obtain a 75% loan to value mortgage, which will allow them to achieve
a lower interest rate and more affordable monthly mortgage payments.
The second phase of the Help to Buy scheme was launched in
early October. This is available again to both first time buyers and existing
homeowners but applied to both existing properties and new build properties.
The buyer is required to raise a 5% deposit and then obtain a 95% mortgage but
the government will guarantee up to 20% of the mortgage. This means that should
the buyer become bankrupt or the house is repossessed the government would cover
20% of the mortgage. This was aimed to make 95% loan to value mortgages more
available and lenders more willing to offer them.
The Help to Buy scheme is a great idea and opportunity for
those who are unable to save large sums of money for a big deposit. However
sometimes it can be a risk putting down such a small deposit because should the
property drop in value then the buyer would be in negative equity. If you are
able to save even a 10% deposit the window opens for better interest rates and
you are putting more equity into your home which gives you more security.
Property prices have been rising and should you wait to save
for a larger deposit there is a risk that prices may increase even more. It is
also difficult to predict what will happen regarding interest rates because
they are currently the lowest they have been. For example if you aim to save
for a 10% deposit for another year, interest rates and property prices may rise.
So Help to Buy with a 5% deposit may be perfect for you now.
Since the scheme has been launched we have provided
conveyancing services for many Help to Buy transactions and are familiar with
the process. Don’t hesitate to get in touch for more information or a quote
regarding Help to Buy conveyancing or visit our dedicate website. Help To Buy
