The government’s Help to Buy scheme will help homebuyers with a deposit of 5% get on the property ladder.
- A new phase of the Help to Buy scheme has been launched
- 15% of the property’s value will be guaranteed by taxpayers
- The initiative will cost the government £12 billion
The government’s Help to Buy initiative to help prospective homebuyers get on the UK property ladder has been given a boost, as a number of financial providers have begun to offer loans to those who can only afford a small deposit on a home.
This phase of the Help to Buy scheme will see 15% of the property’s value guaranteed by taxpayers on new and pre-existing homes worth up to £600,000, in return for a fee the government will pay to the lender.
Mortgages are being offered by certain banks as of today (October 8th), with NatWest and the Royal Bank of Scotland offering mortgages for the Help to Buy initiative straight away, while Halifax will take part by the end of the week.
The scheme will enable potential homebuyers to borrow mortgages with a loan-to-value of 95%, meaning they only need to provide a deposit of 5% of the price of the property.
This £12 billion initiative is due to continue for three years in an attempt to encourage more first-time buyers to purchase a property of their own.
Prime Minster David Cameron said: “Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out.”
Earlier this year, the government committed to providing loans of up to 20% of the price of the home with potential buyers contributing at least another 5% as a deposit. This will help them get a mortgage of 75% to cover the rest of the property.
In addition to paying back the bank, owners will only be charged 1.75% of the value of the loan in the sixth year – following five years of not being charged for the finance.