Buying a home and getting on the property ladder is one of the biggest goals that many in the UK have. It’s not just something that’s limited to the UK, either — you might find that your neighbors across the pond in Canada as well as the US will definitely share your dream of owning a home. No matter where you live, it can feel like it’s downright impossible to buy your first home. Property values on the rise again, and tough credit conditions make it hard for “regular people” to find themselves in their first home. However, does that mean that we all just stop trying to make life better for ourselves? Not at all. You will definitely want to make sure that you focus on getting the loan that you need to get the home no matter what. It’s going to be the key to long term investing in your life.
Yes, renting is something that a lot of people do for a very long time, and you will probably need some time to work up a deposit. But what if you already have a deposit and you still don’t have enough to really get the home that you want?
There might be some help with you after all. The government has done a scheme where you can buy a home using an equity loan.
There are some restrictions that you need to make sure that you can follow below you apply for the program.
As mentioned earlier, these equity loans are only for certain newly built homes on specified housing developments in England. They are provided through HomeBuy agents — they hold the right to decide if you can buy a home this way. These housing associations can run schemes for people who have a tough time buying a home.
There is an income restriction — your household has to earn 60,000 GBP or less. In addition, you will have to prove that you cannot afford to buy a home in your area any other way. This is so that people that need help the most will be able to get their needs met.
These loans are going to be open mostly towards first-time buyers as well as anyone that rents a council or housing association property.
The basic scheme here is that you buy the home with 70% of the cost met by your mortgage and the savings that you’ve built up over time. The other 30 per cent is handled by the govenrment and the house builder through an equity loan.
Now, it’s important to understand the finer print here. The loan is called an equity loan for a reason — the value is going to change based on how much your home is worth. The amount you owe is going to rise and fall with the value of your home. The title will still be in your home, which means that you can sell your home at any time.
What happens when the home is sold? That’s a good question — the 30% that’s held by the government is going to be taken out of the proceeds of the house sale.
If you decide to keep the home, you will need to pay back the equity loan after 25 years.
There are indeed some fees involved with this scheme. There are no fees assessed for five years — this gives you time to save up for them. The 6th year that you have the loan you will be charged a fee of 1.75% of the loan’s value. Every year after this, the fee is going to go up. The amount of increase is calculated using the Retail Price Index plus 1 percent. You can find the RPI index in most newspapers, within the finance section.
Keep in mind that these fees are on top of your equity loan payments. You can pay them to the National HomeBuy agent, and they will contact you before the fees begin to set up monthly payments with your bank.
If you want to pay the equity loan back early, this would definitely be a good thing. It’s known as staircasing, and many homeowners use it when they realize that they can pay a little extra and have the interest costs kept to a minimum.
You still have to talk to the National HomeBuy agent and figure out if there are nay additional costs for this.
Overall, we think that this govenrment scheme for first-time buyers and those with a low to moderate income is a good fit. Everyone should feel like they have the chance to own a home, and this scheme could be just what you’re looking for! Check it out for yourself today — you’ll truly be glad that you did!