With the government’s Help-to-Buy scheme coming to an end in March 2023 and new homes taking up to a year to build, first-time buyers will need to get in quick, according to Gloucester-based mortgage broker, The Mortgage Brain.
SoGlos spoke to Rupert Swetman, head of mortgages at The Mortgage Brain, to find out how it can help first-time buyers turn five per cent deposits into 25 per cent deposits – and take advantage of the scheme before it ends.
About the expert – Rupert Swetman, Head of Mortgages at The Mortgage Brain
Rupert Swetman is Head of Mortgages at The Mortgage Brain. Thriving on building relationships with customers, he understands the benefits of creating a smooth and efficient journey for mortgage applications.
The Mortgage Brain has over 30 years’ experience helping customers find the best mortgage. Its unique Mortgage Search System is continually updated with the latest offers from the widest range of lenders, allowing advisors to quickly locate the best deal to suit a client’s individual circumstances, wherever they are on the property ladder.
For more information, visit themortgagebrain.net.
How does the Help-to-Buy scheme work for first-time buyers and how much can they borrow?
Help-to-Buy is only available for first time buyers purchasing a new-build property and the housebuilder will need to be registered for Help-to-Buy by the Homes and Communities Agency – their authorisation code will be included on their marketing material.
The government will lend up to 20 per cent (or 40 per cent in London) of the value of a new-build home through an equity loan, which is a second loan on your property, in addition to the mortgage.
The buyer contributes a deposit of their own of between five and 20 per cent, then the Help to Buy scheme increases that deposit up to 25 per cent, which leaves the buyer needing a mortgage for 75 per cent of the property value.
How does that work in real terms?
If you buy a property for £250,000 with a five per cent deposit of £12,500, the government will make up the deposit to 25 per cent with a 20 per cent equity loan of £50,000.
You would therefore need a mortgage for 75 per cent of the value of the property, so £187,500 in the above example.
If buying with someone, this would be a joint mortgage, based on joint incomes – you don’t borrow separately.
Any there any price caps to be aware of?
You can buy a property with Help-to-Buy with a maximum purchase price of £349,000 in the south west and £255,600 in the West Midlands; there are other regional price caps in place in England, such as £600,000 in London.
Who can access this scheme and how long will it remain open for?
Help-to-Buy is available to first-time buyers only, who must not own a home now or have owned one in the past in the UK or abroad, or had any form of Sharia mortgage finance. The current Help-to-Buy scheme ends in March 2023, so anyone hoping to use it should reserve a home as soon as possible – you will need to complete the purchase before next year’s deadline and at present, properties are taking up to a year to be built.
What are the costs of Help-to-Buy?
The government equity loan is interest free for the first five years. A fee of 1.75 per cent is charged from year six, rising annually by RPI inflation, plus 1 per cent.
The equity loan can be repaid at any time within 25 years (or the term of the mortgage), or on sale of the property, when the initial loan is repaid, plus a proportion of any growth in the property value.
For example, if the property goes up in value by 2 per cent and you have an equity loan of 20 per cent, you will have to pay back 20 per cent of the new purchase price – so more than you borrowed. If the property is worth less, you will pay back 20 per cent of the lower value, so you will pay back less.
How much do you have to earn to be considered?
There is no household annual income limit to access the scheme.
How can The Mortgage Brain help with buying new builds specifically?
Our specialist new build homes mortgage team works with all the UK’s leading house builders and if you’re referred directly to us by them, you won’t pay any arrangement fees.
Once we process your mortgage application, we handle everything for you through to completion and are available seven days a week to make sure you meet any timescales agreed with the developer.