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Mortgage options for first-time buyers - Government schemes

Posted 15 January 2016

Government schemes for homebuyers have been a godsend to first-timer buyers, leaving them with a range of mortgage options for their purchase...

There are numerous ways to buy your new home

Just as there is a comprehensive choice of new builds you can buy, there is a wide range of ways you can purchase your new home.

One of the major benefits of buying a new build property is that it allows you to access a whole variety of schemes, initiatives and incentives offered by the government. Help to Buy is perhaps the best known. It's not just one scheme but comprises a number of different initiatives that are aimed to help you buy your own home. It's been a huge success since it began, with hundreds of thousands of buyers using it, especially first-time buyers. For most government initiatives, buying a new build home is an essential part of the qualifying criteria.

Here's more information about some of the government schemes on offer. 

Help to Buy: Equity Loan

The government gives a loan of 20% towards your deposit after you put down 5% of the property price. The loan is interest free for five years after which you pay a low rate of interest. With a 25% deposit in place you also benefit from the better terms that come with a 75% mortgage.

Help to Buy: ISA

For every £200 you save in a Help to Buy ISA, the government gives you £50 (25%). This means if you save £12,000 (the maximum amount), you will receive an additional £3,000 from the government, giving you a total of £15,000. There is no catch to receiving this money. As long as you put a certain amount in each month, then you receive the government bonus. When you're looking to save up for a deposit, its extra cash that can be very welcome indeed. 

Help to Buy: Shared Ownership

This is a part-buy/part-rent scheme where you buy a percentage of the property to begin with then pay an affordable rent on the remainder of the property until you want to buy the remaining shares in the new home.

When you feel you can't afford the full asking price, it’s nice to know there's a way you can just pay around 25% of the purchase price to begin with and pay the rest later when you can afford it. 

Help to Buy: Mortgage Guarantee

This scheme allows you to borrow up to 95% of the property purchase price with the government giving a guarantee to your lender that in the event of the mortgage not being paid, they will step in with the money. In that scenario, the borrower would lose the house, however it means with this guarantee in place to begin with, you're in an excellent position to get a very good mortgage with favourable terms. 

Starter Homes Initiative

The Starter Homes Initiative is a government scheme which aims to make 100,000 new homes available for first-time buyers under the age of 40. The buyers of these new build homes will be entitled to a 20% discount. You can find out more on our starter homes information page. 

These are just some examples of the numerous government initiatives you can take advantage of, subject to qualifying criteria, if you decide to buy a new house. All of these government schemes have qualifying criteria such as Help to Buy: Equity Loan being only available on homes worth £600,000 or less. However, as a buyer of a new home you'll opening up a whole world of opportunity in terms of extra financial help you could receive. 

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