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Government help for buyers of new-build properties

16.08.2013

Despite there being an advantage for buyers in the current housing market, getting onto the property ladder, or even relocating, can be a daunting task, especially for those who are struggling to put together a sufficient deposit. However, in a bid to boost the housing market and to encourage house builders to start building again, the Government has introduced a number of assistance schemes.

For those looking to purchase a home for the very first time, the First Buy scheme enables first-time buyers to purchase a new-build property with the assistance of an equity loan. The loan, which is interest free for the first five years, can provide for up to 20% of the full price of the property, with a maximum property value of £280,000. To be eligible, this must be the buyer’s first property and their annual household income must be below £60,000. The buyer will also need to be able to cover a 5% deposit.

For those who are put off by the large deposits that are needed now to secure a mortgage, the New Buy scheme can provide relief. This Government backed ‘mortgage indemnity’ system, operated by the home building industry and mortgage lenders, will see participating lenders provide a 90-95% loan, and is aimed at both first-time buyers and those who may already have a home but are unable to move as they only have funds for a 5-10% deposit on the property they wish to buy. This scheme is only available on newly built homes.

Finally, the Help to Buy scheme is open to all buyers seeking to purchase a newly built home. The buyer will need to contribute at least 5% of the property price as a deposit and The Homes and Communities Agency will provide the buyer with an equity loan, which will fund the balance needed to make up the full purchase price of the property. The loan is limited to a maximum of 20% of the property purchase price, with the maximum house price being limited to £600,000. For the initial five years the loan is interest free, with the fee rising to 1.75% of the borrowing in the sixth year, and then rising annually by the increase, if any, in the retail price index plus 1%. The loan must be re-paid within 25 years, or if the property is sold. The same percentage that was initially borrowed of the re-sale price must be re-paid. For example, if 20% were borrowed to purchase a house for £200,000 (£40,000), if the property sold for £300,000 the repayment would be 20% of the sale price (£60,000).

These schemes will not only reassure and help home builders, but also encourage buyers back into the property market and will help those who wish to relocate and to purchase a newly built property.

For anyone looking to take advantage of these schemes, especially those who are buying for the very first time, it is always worthwhile to seek professional, expert legal advice to steer you through the process of buying your home.

Alan Williams can be reached at [email protected]

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