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Help To Buy: Can Anyone Use A Help To Buy Mortgage Scheme?

Discover How The Help To Buy Scheme Works

To understand whether the help to buy mortgage works we need to know what’s gone on before and just how it works. The help to buy mortgage scheme was started to help the struggling newbie buyers to get a foot on the housing ladder back in April 2013. The help to buy scheme is expected to last until 2020 and is available in England. You’ll find similar scheme operating in Wales, Scotland and Northern Ireland.

Since 2008 home buyers and first-time buyers have needed to find a 25% deposit to be able to buy a home. This means that home-movers needed the same 25% to come from the sale of their home and personal savings otherwise they could not move either.

The mortgage market has been in limbo for the past couple of years due to the economic downturn. The bank of Mum and Dad was founded by those parents who could afford to help their own children. The deposit that parents were able to provide came from savings, from parents with sufficient equity in their own homes to remortgage and parents prepared to stand as guarantor for their children.

Help To Buy Mortgage Explained

The government of the day released the ‘Help to Buy Scheme’ because the housing and the mortgage market was stalling due to the credit crunch. Now, first time buyers and home-movers only needed to find a 5% deposit instead of a 25%. The government would fund and guarantee the 20% still needed to make the mortgage calculations work. To further stimulate new homeowners to come forward the help to buy scheme would be interest free for the first five years.

Following the five-years the help to buy participants are going to be charged 1.75% on the 20% outstanding which will go up with inflation and does not need to be repaid before the property is sold. It is possible to pay the 20% equity backed by the government when you remortgage after the first five years has elapsed. Some other benefits of the help to buy scheme means that it is possible to borrow up to £600,000 and anybody with a 5% deposit who can meet the lending requirements for a mortgage can make use of the scheme.

This is How the ‘Help To Buy Mortgage’ Works

In order to qualify for the ‘Help to Buy Scheme’ you need to save up enough money to really make the calculations add up and you’ll need money for the following additional costs: for the following

Listed Below is a list of the costs you will incur buying a new home

1. Your 5% deposit depends on the amount of money you wish to borrow.

2. Search fees, Legal costs, Stamp duty and telegraphic transfer fees are all charged by your employed Solicitor

3. Mortgage Arrangement set-up fees are charged upfront by the mortgage company to obtain the mortgage product or interest rate.

4. Mortgage set-up fees – lenders will charge a mortgage booking fee, usually £100.

5. Property Valuation Fee is billed by the lender to make sure your new home is worth the amount of money you wish to borrow

6. Surveyors fees to inspect for structural defects in property

7. Removal costs

8. You need to be able to afford the new monthly mortgage payments, the council tax, etc.

Don’t turn-off the help to buy calculator yet as there are more costs. Keep the calculator running as the costs do not stop after you have bought your new home. It’s standard for property builders to leave new home buyers to put up secure fencing all round their new homes and for the buyers to fit new lighting and carpeting throughout the home and the list just goes on.

By following the breakdown above you will probably be wondering how you will afford a new home with all the additional costs. It’s at this point that most people are grateful for the government ‘Help to Buy Mortgage’ assistance.

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