Recent changes to Help to Buy Scheme set to help homeowners
Posted on 23 September 2019 by Laura Godfrey
The number of purchasers taking out a mortgage of more than 25 years has increased significantly in recent times.
Therefore going forward, people using Help to Buy to purchase their property will have the option of taking out a mortgage with a term of more than 25 years. Recent changes have extended the possible term from 25 years to 35 years.
This should assist purchasers by allowing them to reduce their monthly mortgage repayments by spreading their borrowing over a longer period.
More than 210,000 people have bought homes using Help to Buy in England since it was originally launched in 2013. The scheme allows purchasers of new builds to pay a 5% deposit with the government lending up to 20% (40% in London) and a mortgage of 75% (55% in London) to make up the rest. No interest is payable with a Help to Buy loan for the first 5 years.
Previously when re-mortgaging after a fixed rate period, those who purchased with Help to Buy were limited as to the number of mortgage products available to them because they couldn’t in practice take out a mortgage for more than 25 years from the original purchase date. Many lenders required the Help to Buy loan to be paid off completely before allowing a remortgage. This meant after 5 years many borrowers were unable to remortgage, leaving them with not only the additional cost of the Help to Buy monthly repayments but also a more expensive mortgage rate or even a variable rate.
The change will open up the remortgage market to more lenders, giving homeowners more choice.
Help to Buy is also set to undergo further changes in April 2021.
From then, it will only be available to first time buyers and the maximum purchase price of a new build property will be capped on a regional basis at 1.5 times the average first time buyer price the government forecasted in autumn 2018.
Posted in: Buying & Selling Your Home