[This is a guest post]
As many young, first time buyers are aware, entering the housing market is a tricky business. Whether it’s being accepted for a mortgage or simply saving for a deposit, many first time buyers may be feeling as though they’ll never be able to get a foot on the property ladder.
The government here in the UK has set up the Help to Buy Scheme, which aims to assist first time buyers along with those looking to move to other houses during these difficult financial times. While the scheme appears to help those in need, it’s important to know whether this is the right track for you.
What is the scheme?
The Help to Buy Scheme, backed by the UK Government, was set up to help people climb the property ladder, whether entering the market for the first time, or if they’re looking to move up. The scheme works by reducing the amount of deposit needed to purchase a house, with some initiatives providing buyers with the chance to only pay a 5% deposit.
To start the scheme, the Government invested £3.5 billion with the aim of aiding 74,000 buyers over the initiative time, as well as providing a much needed boost to the construction industry.
How it works
The initiative is split into two different parts; an equity loan, and a mortgage guarantee. Through the equity loan, the government will allow buyers to borrow an additional 20% of the price of the property, and remains interest free for five years.
To apply for this part of the scheme, the buyers must be able to demonstrate savings or funds; have a good credit history; and take out the loan with a qualified lender. The equity loan is available on new builds whereby the construction company has agreed to the scheme, many of which can be found on RightMove.
From January 2014, a second type of initiative will be available, called a mortgage guarantee. The process will involve the Government providing £12 billion in guarantees for those with a small deposit for the houses. The finer details are unknown at the moment, though the scheme will be available for both first time buyers and home owners.
The scheme so far
Speaking to Mortgage Solutions, a Yorkshire Building Society spokesperson said: “We anticipate strong levels of lending across the entire Group in the second half of 2013.”
While many banks were reluctant to participate in the scheme at the beginning of the initiative, many have now started to see the benefits. Yorkshire Building Society made headlines with the scheme by lending £2.5 billion in the first six months of the year, with £925 million going to first time buyers.
Photo by first home ArmchairBuilder.com