How Help to Buy Will Help you Move
If you bought your house about six years ago with a large mortgage, you have may have discovered you've been “locked in” when you explored selling to purchase a larger home for an expanding family.
Many homeowners, especially in the Leeds, York and Selby areas, have suffered from falling and then stagnant house prices and have been unable to move. Not because they couldn't sell their property, but simply because they do not have enough equity in their home to fund a deposit moving to a larger or better property.
The government’s Help to Buy Scheme is not, as some people believe, just for first-time buyers. It is open to anyone buying a property up to £600,000 for their own use. The Scheme was originally scheduled to launch in 2014, but the Government has brought its implementation forward to 7 October. So now, moving up is a real possibility for more homeowners.
How it works is simple: you can now buy a property with as little as a 5% deposit. With the Government guaranteeing the higher loan-to-value mortgages of up to 95%, mortgage lenders are in a position to offer these larger percentage traditional repayment mortgages, allowing more people the opportunity to move up. Homeowners whose problem wasn't meeting mortgage payments but was coming up with sufficient equity for the deposit are the winners under the new scheme.
Homeowners should not confuse this with the Equity Loan Scheme, which was launched earlier this year which was only for new-build properties. The Mortgage Guarantee Scheme is for resale and new-build properties, and is open to those who can demonstrate that they have sufficient income to repay the higher mortgage. An important proviso is that the Scheme covers only traditional repayment mortgages, not interest-only mortgages or buy-to-let mortgages, or for purchases of second homes.
Here’s an example of how it would work to the benefit of homeowners in the area we cover.
Mr and Mrs A bought their first home together in Leeds in 2007 for £180,000, with a 10% deposit. With the market slump, their property dropped in value and though it has regained somewhat it is now only worth £175,000. Mr and Mrs A now have one child and are expecting another, so a bigger home is a necessity. The couple both work and have good salaries, but with only £13,000 in equity in their home, they have not got the 20% to 25% deposit they would have previously needed to move up to a property valued at £220,000. To buy their larger dream home under the Help to Buy Scheme, they only need a minimum deposit of £11,000 to move up.
Preston Baker’s team of Mortgage and Protection Advisors are working with lenders participating in the Mortgage Guarantee Scheme. If you are interested in selling your home and moving up, contact your local branch to make an appointment with the Preston Baker Financial Services advisor in your area.