It’s been well over a year now since the Government Help to Buy scheme was launched, but there are still some common myths and misconceptions about how the scheme works. In this article we hope to dispel some of these myths and show you how Help to Buy could help you to purchase a new home.
What Is Help to Buy?
Let’s start by recapping what exactly Help to Buy is because it can be unclear! There are two parts to the scheme and, confusingly, the Government decided to call them both Help to Buy – firstly, Help to Buy Equity Loan (Part 1), which is exclusively for new build homes and secondly, Help To Buy Mortgage Guarantee (Part 2) which is for resale homes.
With Help to Buy Equity Loan (which is the one you would use for a new home) the Government lends you 20% of the property price, you pay a 5% deposit and apply for the remaining 75% as a mortgage. You don’t pay anything back on the Government loan for five years but start repayments on the mortgage when you move in to your new home.
How does Help to Buy ACTUALLY help me?
Help to Buy has been specifically designed to make home buying more affordable. Home buyers require just a 5% deposit to secure their home, while the 75% mortgage means they will also benefit from better interest rates and LOWER mortgage repayments.
It’s only for first time buyers isn’t it?
One common misconception is that Help to Buy is only for first time buyers when actually existing homeowners could also be eligible. If you need to move to a bigger house, due to a growing family for example, it is worth looking at Help to Buy as an option.
It’s too complicated!
Despite being a Government initiative, the process is more straightforward than buyers often think. Nancy and Jonny, buyers at Seddon’s Bridgefold development in Rochdale, were impressed at how quick and easy the process was. Nancy said “The initial Help to Buy approval took just a week, and the whole process, from submitting the application to moving in, took only 5 weeks.
“The financial advisor did all of the paperwork for us – from the Help to Buy forms to the mortgage forms, and even sorted out our house and life insurance. Using Seddon’s nominated financial advisor and solicitor meant the process went smoothly, and there were no hiccups along the way.”
No one really uses it
Unlike some of the previous Government schemes, Help to Buy has had a massive uptake. More than 27,000 homes have been purchased since the scheme was launched. It is very popular and looks set to be around for some time, with the Government extending the scheme until 2020.
I’ll never be able to save for the deposit
Help to Buy has definitely eased the strain on first time buyers yet one of the most daunting challenges is still raising the funds for a deposit. But there are ways!
Bank of Mum and Dad
Getting help from parents, or ‘the bank of Mum and Dad’ as it’s commonly known, has helped many of our buyers to raise a deposit.
They may not be able to provide you with the whole amount, but perhaps they can provide you with a significant proportion, giving you a bit of breathing space to save the remaining chunk. Plus - borrowing to support a deposit with credit or bank loans can adversely affect your Help to Buy application, as well as future mortgage applications.
Move back home (temporarily!)
Another way, which a lot of savvy buyers are opting for, is moving out of rented accommodation and back in with parents, freeing up cash to put towards a deposit. Whilst this may involve a bit of short term ‘pain’, the long term gain is that you will be moving into your own home faster, perhaps combating potential price rises and ensuring your hard earned money goes towards investing in your future.
Seddon Homes also offers help in the form of its Deposit Builder scheme. Working with an independent financial advisor, we agree a structured savings plan that helps you to set aside weekly or monthly amounts and gives you a timescale for buying your home. Phoebe (20) and Andy (22) are a young couple who we have recently helped to buy a home using Help to Buy and Deposit Builder at Seddon’s Mosaic development in Runcorn.
Andy says “With the help of the Sales Advisor at the development and the Independent Financial Advisor, we were able to put together a deposit savings plan to raise the funds to buy our new home in time for the build completion later in the year. Although it was daunting for us, Seddon Homes made the process so easy and there was no stress or worry. “
There is still a job to be done as so many people do not fully understand Help to Buy, often confusing it with Shared Equity and Shared Ownership. Hopefully our myth busting will encourage more people to come and talk to us about the scheme, and see how easy it is to purchase a Seddon Home with Help to Buy.
Seddon Homes is holding a ‘Get you Moving’ weekend at its Mosaic development in Halton Brook, Runcorn at the end of the month where you will be able to chat to staff from Help to Buy Northwest about the scheme, as well as find out more from Seddon Homes about Deposit Builder.
Denis Maddock, Sales and Marketing Director, Seddon Homes