Government Help to Buy Scheme
Talitha Murphy, head of conveyancing at Lancashire’s Vincents Solicitors
Latest government figures show its Help to Buy initiative has been used by 73,000 people nationally to purchase a home. In Lancashire just 1,000 H2B transactions have been made and, despite our conveyancing work up more than 50 per cent, just a handful of our clients have used the scheme in the last year. So what’s holding Lancastrians back?
There’s arguably never been a better time to buy a new house, with interest rates at an all time low, new mortgage products available and private sector rents spiralling. Help for those with a small deposit is also at hand from the government’s Help to Buy initiative, but few people in Lancashire are taking up the chance to make the move using this form of support.
Anecdotally, it appears there may be a misconception that Help to Buy is just for first time buyers or those purchasing new builds, both untrue. Lancastrians are a notoriously sensible sort and there’s a chance there is some mistrust or caution about a scheme that could seem too good to be true. But I believe the biggest barrier to its use is a lack of awareness of the benefits due to woeful under-promotion of the opportunity.
The county’s property industry has an important role to play in educating clients about a scheme that could save them thousands and make that ladder accessible for people who may never have considered it before.
Buyers often fear hidden costs and fees, and are wary about any additional paperwork which they worry could see them being knocked back for a mortgage approval. Clients I know could benefit from H2B are put off by the prospect of more form filling and a catch further down the line. But, in truth, the process is as straightforward as every other part of the house buying process.
Help to Buy provides purchasers with two options, and both are open to everyone, not just first time buyers as often assumed. Anyone looking to buy a new build home can receive up to 20 per cent of the deposit as a loan from the government which, added to their own five per cent, would allow them to get a mortgage for just 75 per cent. If it is an older property that has caught their eye then the government’s mortgage guarantee can be used to reassure the bank that the loss of up to 15 per cent in equity is covered should the house price devalue.
The catch? Well the government’s equity share comes as an interest free loan for five years, after which interest repayments apply. A subsequent sale of the property would see this loan paid back but the hope is the remaining equity provides the purchaser with their new deposit. With the mortgage guarantee scheme not all lenders have signed so the choice of mortgage might therefore be limited, but it is available for use on non-new build homes unlike the equity share. Both options are straightforward to arrange and require little additional paperwork from the buyer’s side. Fees are minimal in the big scheme of things and, for the sake of asking a few questions of the agent, housebuilder, mortgage broker, bank or lawyer, getting the keys to their own home could be closer than many buyers dare to believe.
If you would like more information about Help to Buy or Conveyancing costs for first time buyers you can reach Talitha on 01772 785313 or email Longridge@vslaw.co.uk.