Thinking of Buying a New Home ?
There are some good reasons
There are many advantages to buying a brand new property
For example, the property will come with a 10 year building and structural warranty along with other guarantees. If you are considering buying a newly built property, then you should look at the government’s Help to Buy Scheme. The scheme can help you get onto the property ladder and into a brand new home but the scheme is not limited to first time buyers.
Essentially speaking, the government is prepared to lend a purchaser up to 20% of the purchase price on a newly built home. The purchaser will only need to find a 5% cash deposit and a 75% mortgage to make up the difference. Your first mortgage must be with a qualifying bank or building society and the government loan will rank as a second mortgage. You must repay the second charge when you sell your home or re-mortgage your home or after 25 years (whichever is the earlier). The maximum that you can borrow under the scheme for properties outside of London is £120,000. The maximum purchase price for the property is currently £600,000. Different financial limits apply to London properties.
Help to Buy is a loan from Homes England, which is the trading name of the Homes and Communities Agency. This scheme is available to all buyers of newly built homes. Essentially speaking, there are four stages to the procedure, which your solicitor will be able to advise you upon.
Once you have obtained the loan from the government on completion of your new purchase, you do not pay any interest on the loan for the first 5 years.
After that period, you will pay interest on the loan until it is repaid. During the first 5 years of the loan, you are free to repay the loan by re-mortgaging your property, should you wish to do so.
If you decide to sell your property or to repay the loan after 5 years, then the capital loan repayment is calculated as 20% of the house value of the property at the time it is repaid. Accordingly, it is important to understand that the cost of the loan could increase after 5 years quite significantly if the value of the property has risen.
You can only purchase from certain developers who are involved in the government scheme. Once you have entered the scheme, there will be restrictions. For example, you would not be able to own a second property as the scheme is designed to help you move up the property ladder.
The scheme is unlikely to last past 2023, so take advantage of it! Your solicitor or financial advisor can provide you with further advice.
By John Ryan, Head of Conveyancing
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