> >

Help to buy

Help to buy

How does help to buy work

08/03/2017

Help to buy is a government lending scheme that enables new home buyers to get mortgages easily by assisting them in raising a deposit for a mortgage. Traditionally, mortgage lenders usually require borrowers to make a deposit or have security when applying for a mortgage. The deposit can be a percentage of the price of the house that the lender intends to pay. The security is a guarantee that the lender will not lose his money when he gives out a mortgage. The more deposit you make, the better your mortgage deal will be. The bank can offer you lower interest rates and larger mortgages when you pay more deposit. The big question still remains how does help to buy work. Basically, help to buy helps you raise larger mortgages so that you can enjoy a good deal from a lender.

Help to Buy Scheme arrangements before 2017

There are two slightly different arrangements within the help to buy scheme. The first one is the Mortgage guarantee scheme. This scheme was instituted on October 8th, 2013 and was expected to run until December 31st, 2016. The scheme should have expired at the beginning of 2017. The other arrangement is the Equity Loan scheme. It was instituted in April 1st, 2013 and is open until 2020. It is the arrangement that anyone who intends to get into “Help to Buy” scheme from 2017 should join. There is no significant difference between the two arrangements.

Requirement for Help to Buy

The first thing you need to know is the criteria for admission into help to buy scheme. Not everyone is eligible to get help with the scheme. This scheme is only for new home buyers. The buyer must use the property has his sole residence. He cannot rent out this property. The now expired “mortgage guarantee scheme” could be used to buy both new build and pre-existing houses. Equity Loan schemes apply to only new build homes. This means that the scheme is getting tighter in its requirements. The borrower must also prove that he can repay his mortgage. His credit rating must be good. He must also have a steady job or a reliable source of income.

Equity Loan Scheme

In equity loan scheme, a buyer is expected to raise a deposit of only 5% of the property value. The government will then give the buyer an extra deposit of up to 20%. With a total deposit of 25%, you will find it easier to get a good mortgage deal. Ordinarily, you can get a mortgage with your 5%. However, a lender may be stricter on an applicant with only 5% deposit. The extra deposit that you get from the government is a loan that must also be repaid. The loan is interest-free for the first five years. On the sixth year, you will have to pay an interest of 1.75% of the loan. The interest rate will increase by 1% every year until the loan is fully repaid. You may also have to pay for inflation.

Borrowers can repay the equity loan at any time during their stay in the property. You may pay 10% or 20% of the loan provided that the loan is at least 10% of the value of your property. If you leave your property without paying the loan, the government will sell the property and reclaim its money.

Examples of affordable housing schemes

02/01/2017

Exorbitant house prices in the UK have prompted the government and housing companies to come up with various schemes to provide affordable housing. These schemes give key workers and other low income earners an incentive to get homes at reduced price. The affordable housing schemes are not reserved for people with low incomes. Anyone who qualifies can join the scheme. You can find out if you qualify by contacting the local housing association. The schemes range from joint property ownership to loans that help people buy homes. These programs are meant to get people to buy and not to rent houses from Social Housing Providers. The houses meet the high standards of construction and are very energy efficient. The houses are usually found in areas with new housing developments.

Shared ownership schemes

Shared ownership scheme allows a buyer to co-own a house with a Housing Association. The buyer buys 25% to 75% of the house at reduced rates. The remaining percentage is owned by the Housing Association. The buyer is required to pay the Housing Association annual rent that is based on the amount of share the Association claims on the property. The amount of rent varies from place to place and is also determined by the size of the house. The annual rent cannot exceed 3% of the share owned by the Housing Association.

A prospective buyer of shared ownership property can fund the purchase from his own pockets or seek help from mortgage lenders. The mortgage lender must know the type of property ownership that the buyer is getting into. Sale of shared ownership properties follows the rules and principles of conveyance. The buyer is therefore required to hire a solicitor to help him with conveyance.

A buyer can increase the amount of his shares on the property after he purchases it. He does this by buying more shares from the housing association until his shares reach 100%. This is called staircasing. Outright purchase of shared ownership properties is not allowed by law. This is to keep the property available to other people who are interested in affordable housing.

Equity loans

You can also buy affordable houses using equity loans. Equity loans are in many ways similar to mortgages. They are used to buy properties but must be refunded after a given period of time. The difference between equity loans and mortgages is the criteria for getting loans and the arrangements for paying refunds. Equity loans are only available for new homes. They cannot be used to purchase pre-existing properties.

To get an equity loan, you have to apply to the Home Buy Agents. You must have a deposit of 5% and a mortgage of up to 75% to qualify for the loan. The balance of the price of the house is paid for by the equity loan. The percentage of equity loan you are given becomes a share of the property. This is the amount you have to repay to fully own the property. You are required to repay equity loan upon sale of the property or when the term of the loan expires.

What do you need to know about how to save to buy ISA?

22/12/2016

Houses in the UK are very expensive. The go for as much as £450,000. That is much money for most people in the UK to raise. Mortgage lenders do help people in financing house buying. However, there is a limit to what the lenders can do. The government came up with a plan to help prospective new home owners to purchase houses. The government’s brainchild is the “Help to buy ISA” scheme. “Help to buy ISA” is a property purchase scheme where the government offers a bonus on house deposit. The prospective home owner has to save to buy ISA. The bonus is 25% of the amount of money you have saved at the time of buying.

Individuals applying for ISA are required to place a deposit of £ 1000 in a “Help to buy ISA” account. This money can be deposited in Barclays, Lloyds Banking Group, Nationwide, Santander, and Virgin Money. These banks have signed up to offer “Help to buy ISA” scheme. The deposit should be followed by a monthly savings of a maximum of £ 200 a month. At this rate, you can be ready for the full government bonus of £ 3000 in five years. £ 3000 is the maximum you can get from the government. The minimum is £ 1600. Getting the full government bonus, given that the bonus is 25% of the total saving, means that you must have saved £ 12000. To qualify for ISA, you must have at least £ 6400 in your “Help to buy ISA” account.

“Help to buy ISA” is only available to first time home owners. Previous homeowners do not qualify for this bonus. You can only have one “Help to buy ISA” account. “Help to buy ISA” is treated as an individual incentive rather than a household affair. This means that every spouse is entitled to an ISA account. To make proper use of ISA, you and your spouse can open an ISA account. If each of you saves £ 12000, you will be entitled to a total of £ 6000 government bonus, with each of you getting. That is enough money to place as a deposit for a house.

You only get “Help to buy ISA” after you have completed conveyance and you are ready to make house payments. The money cannot be used to cover conveyance fees. You can also never withdraw it directly. Upon completion of conveyance, your solicitor applies for ISA. The money is transferred to the seller.

Other government savings schemes include Cash ISA, and Stocks and Shares ISA. An individual with “Help to buy ISA” cannot have a Cash ISA account in the same tax year. You have to close one of the accounts before you open the other. You are allowed to transfer funds from your Cash ISA to your “Help to buy ISA” account. The benefit of Cash ISA is the £ 1000 tax-free interest that is given to Cash ISA account holders. You can have “Help to buy ISA” account alongside Stocks and Shares ISA accounts.

Why you need help to buy remortgage properties

01/12/2016

Most people use mortgages to buy homes. Remortgaging is a new scheme for the purchase of property. Banks are now inviting current mortgage holders to take remortgages. Buyers need help to buy remortgage and properties on remortgages. They also need to know costs of remortgaging and the benefits of remortgaging.

You can get a loan by remortgaging a property. The loan-to-value is an important factor to consider when remortgaging a property for a loan. The lower loan-to-value increases your chances of getting the remortgage. Banks tend to shy away from properties whose values are lower than the amount of money they have to give away.

Things that help when you want to remortgage

When you want to remortgage a property, you must entice the lender to accept your terms. Most lenders evaluate a building by looking at it from outside. Very few actually get into the building to get a better approximation of its cost. You have to get the lender appreciate the value of the building as it is. Get them to take a look at the inside of the building. If you have done renovations recently, you should tell the lender this. Better still, give him documents to prove that you have increased the value of the property.

Remortgaging can help you consolidate your debts. You can use the money you get from remortgaging to settle other debts so that then only debt you have is the money from remortgage. This can only work if the money you will get from remortgaging is sufficient to settle the debts you want to clear. You have to hire a professional to help you evaluate your property before seeking remortgage.

Interest rates on mortgages are low at the beginning of the mortgage but rise as years go by. Remortgaging can help you take care of additional financial responsibilities that accompany increased interest rates. You can even avoid the high-interest rates by paying off the balance of the mortgage from the money you get from remortgaging.

Securing a Remortgage

The borrower must think about the cost of securing a remortgage. If you use a broker, then you should expect him to charge a fee. Some agents offer fee-free services. You should determine the services every broker provide and choose one that fits you. If you want to reduce your expenses, then the free broker is right for you. Other costs of remortgaging include legal fees, valuation fees and administration fees. You can use Annual Percentage Rate of Charge (APRC) to find out all costs of remortgaging, from the costs of securing remortgage, to the cost of interests.

Remortgaging can help you buy multiple properties at the same time. This you can do by using money from a property that you have remortgaged to buy another property. The best thing about this is that the properties you buy from remortgage will not even be attached to the lender. The property that is remortgaged will protect other properties from being securities to the debt. If you want to remortgage to buy another property, you have to ensure that the properties you are going to buy are of lesser cumulative value than the one you are remortgaging.

How does Help to Buy work

15/11/2016

Help to Buy is a governmental scheme that helps you move houses or purchase a residential property with a deposit as little as 5%. How can you use the Help to Buy scheme?

  1. Through an equity loan: the government lends you money to buy a newly built house, regardless if you are an existing homeowner or a first-time buyer;For your 5% deposit, the government lends you 20% of the home value as an equity loan, and you can get a mortgage for the remaining part
  2. You do not pay any interest on the equity loan for the first five years and starting with the sixth year; the interest will be 1.75% of the loan
  3. Starting with the seventh year, you will pay 1.75% plus the inflation based on the Retail Prices Index plus another 1%
  4. With a mortgage guarantee: the government acts as a guarantor for your mortgage lender; the government will cover any losses the lender might suffer from you not paying your monthly mortgage paymentsCan be used for old and new houses up to £600,000
  5. Similar to Help to Buy equity loans, London “Help to Buy” scheme loans you 40% of the house value, rather than 20%, when you buy in London.
  6. Help to Buy ISA: this is the best option for people saving to buy their first house; for every £200 you put in this type of tax-free savings account, the government adds £50, up to £3000. The limits on the house value when you apply for an equity loan is £250,000 in the UK and £400,000 in London.

Am I eligible for Help to Buy scheme?

If you already own a house, you can use Help to Buy to move houses, but not to buy a second home or a residential property you plan on renting. “Help to Let” is the scheme where you can buy a property with the intention to rent. On the other hand, Help to Buy only works with repayment mortgages (you pay back the capital and the interest together; the opposite type of mortgage is paying the interest first and then the capital).

“Forces Help to Buy” is a distinctive part of the Help to Buy scheme, where, if you are serving in the military, you can borrow up to 50% of your salary (interest-free) for a deposit and other buying costs, including legal fees. The maximum you can borrow is 25,000, repayable over the years. You must have completed a minimum length of service before applying, be more than six months away from the end of your service and also meet certain medical criteria.