Below, Andrea Fawell, Sales and Marketing Director of Kebbell, explains how one of the biggest schemes aimed to help first time buyers, Help To Buy, is changing and what alternatives are available.
Current Help to Buy scheme
One of the most popular schemes is the Government’s Help to Buy equity loan which is a loan for up to 20% of the cost of your newly built home, so you only need a 5% cash deposit and a 75% mortgage to make up the rest. There is also a London Help to Buy scheme, so if you are buying in London you could borrow up to 40% of the purchase price, as well as a special Armed Forces Help to Buy scheme.
This Help to Buy scheme is aimed at helping buyers who are struggling to save a deposit or who would struggle to buy in an expensive area, but it has come under some criticism for assisting buyers who may not need it. The scheme applies to new build homes only, that are less than £600,000 and the house must be the buyers only property.
The loan is interest-free for the first five years, interest is then charged following this period. You can pay back in a lump sum or in parts. This scheme is not just for first time buyers, any buyer is eligible so long as they are using it to buy their only home and they are not using part-exchange. Buyers can still use the scheme so long as they legally complete by 31st March 2021 on a house built by 28th February 2021. There may be further changes to the dates as there are calls for the Government to extend the deadline because of delays caused by coronavirus.
2021 changes to Help to Buy scheme
The Help to Buy scheme is changing in Spring 2021 because from April, only first-time buyers will be able to use the scheme and the current plan is to end it completely by 2023. The scheme will set a regional property price cap to focus on helping those who need the scheme the most.
Stamp duty holiday
The removal of stamp duty on properties up to £500,000 has meant there is a rush to buy before the end of March 2021, when the holiday comes to an end. The stamp duty saving on the first £500,000 of a house purchase is an instant £15,000 through this short-term scheme. To benefit from this cash saving purchasers will have to complete their purchase by 31st March 2021.
Therefore, there is a great demand to take advantage of both the Help to Buy scheme’s current more advantageous form and the stamp duty holiday whilst they both exist. Although most developers and agents advertise Help To Buy, double-check if you and your new property fit the criteria. Speak to the experts about how you could benefit from the current scheme before it ends and to find out how much you can save on stamp duty. Just think what will you be able to spend that money on instead!
Other schemes to consider
1. Part Exchange - If you are ready to move into your dream new home but are waiting to sell your current property you can avoid precarious chains and estate agent fees by your home being bought in part exchange. Kebbell’s Part Exchange Premium Scheme means we will consider your current home so long as it is less expensive than the Kebbell home you wish to buy. We will then instruct up to three local estate agents to value your home and then make you an offer based on its realistic resale value. We can also give you access to your previous home for a week after your purchase so you can move into your new Kebbell home at your own leisure.
2. Help to Buy ISAs - Choose a Help to Buy ISA to save for your first home and get a 25% Government contribution worth up to £3,000 once you have saved at least £1,600.
Ways to help speed up the buying process
3. Make sure you have a mortgage offer in principle ready to go before you even start looking. If you are self-employed or a contractor, you may find securing your mortgage easier by using a mortgage broker who will advise you how to provide the necessary evidence of your income including tax returns that need to be signed off by a certified accountant.
4. Get your paperwork organised early. You will thank yourself for being organised when it comes to providing current utility bills, bank statements, payslips, credit card statements and any other credit agreements.
5. Check you are registered to vote to ensure you are on the electoral roll because lenders use this data in identity checks. You will need to provide photo ID too so make sure that your passport or driving license is up to date.
6. Boost your credit score to avoid delays in getting your mortgage. Check your credit file and look out for errors as they can be corrected, or explanations can be added to your file. Check your address is up to date on all active accounts. You don’t want to have delays because your mobile phone is registered at your old address. Close unused credit cards if you have multiple ones. Conversely, a long-standing credit card with a good rating may boost your mortgage application.
7. For a smoother mortgage application process also ensure you are consistent and precise with the spelling of names, postcodes and such like so every form completed is accurate. Most forms will be processed by a computer so there is little room for error.
