After the perilous financial crash in 2008, known as The Credit Crunch, the government brought in some backup to try and provide a much needed boost the mortgage market. They brought in new ways to help First-Time Buyers get onto the property ladder, with these being called Help-to-Buy schemes.
There are a number of different Help-to-Buy schemes available in the market. Some you may be able to match with and some others maybe not so much. Here is a list of the Help-to-Buy schemes and some other similar schemes that you may have access to.
The Help-to-Buy Equity Loan is the most popular of the various schemes. If you are a First-Time Buyer in Cardiff and want to get your mortgage process rolling, this could be the ideal way for you to do so.
Firstly, you have to be First-Time Buyer to be able to access this scheme, as well as only being able to purchase a new-build property too. A minimum of a 5% deposit is also a necessary requirement.
The way this scheme works is that you put down a deposit of 5% or more and then the government loan you rest to make up a total of a 25% deposit. Two examples of this would be if you have a 5% deposit they will loan you 20% or if you have a 10% deposit, they will loan you 15%.
This will leave you with a 75% mortgage and the government equity loan which you will have to pay off. You will get a period of 5 years to pay off this equity loan interest-free. If you are unable to meet the 5-year cut off point, you will start building up interest on the amount of the loan that is remaining. This interest rate starting point is 1.75%.
As a dedicated Mortgage Broker in Cardiff, we know that it can be quite difficult to balance your mortgage payments and the equity loan repayment alongside each other. There are ways around this, such as being able to remortgage to raise capital for this loan. This one, however, will increase your mortgage payments.
The Help-to-Buy Shared Ownership scheme was introduced as a means to help applicants to purchase a percentage of a property and then pay the rest back on rent over time.
The percentage of the property that you own in your name has to be between 25-75%. The remaining percentage will most likely be owned by the housing association. This share can possibly be increased at a later date, maybe at a point when you have more money.
The way that your payments work is that you have to pay your mortgage as well as your rent. So what this means is that you are basically paying 100% of the ground rent and service charge on the property. This is still the case, even if your share is the lowest available amount of 25%.
The Armed Forces Help-to-Buy scheme was introduced in 2014 following the previous success of the Help-to-Buy Equity Loan scheme. This scheme had the same concept of the prior version, however, this one was specifically for members of the armed forces.
If you match the criteria of the scheme, it could be a great option for you to take. The government has now extended the deadline/review date of the scheme to later in time at December 2022. Here at Cardiffmoneyman, we are hoping that it stays around, as the scheme is incredibly helpful for existing armed forces members who really need that extra help with getting onto the property ladder.
The Lifetime ISA is often a scheme that is forgotten by homebuyers. It’s not a go-to scheme, however, it’s still very useful to be aware of it, it can help you secure a new home as a First-Time Buyer in Cardiff.
A Lifetime ISA is basically a savings account where your money grows, free of tax. The government will also give you a nice little top up of your savings by an extra 25%, so if you meet the £4,000 maximum amount, you will receive a pretty handy bonus of £1,000.
You have to pass certain criteria in order to gain access to this type of mortgage scheme. All of these details are available on the Lifetime ISA website.