Help to Buy: The second phase

12th February 2016

Three months earlier than planned the government announce their second phase of the help to buy scheme.

The second phase of the help to buy scheme relatively differs from the first phase which is only related to getting a mortgage based on new purchase builds with a price limit of £600,000.

The second phase of the help to buy scheme means as long as you put down a 5% deposit the government would pay up to a further 15% of the property’s’ value to the developer.

It has set aside £12bn of guarantees for up to £130bn of mortgage lending and the scheme will remain open for three years to January 2017.

A Snippet from an article in the Telegraph show the difference between the first and second phase of the help to buy scheme.

“Help to Buy: Phase 1 allows people taking their first step onto the property ladder to borrow up to 20% of the value of a newbuild home from the Government, interest-free for the first five years.

“Borrowers need a 5% deposit and must take out a mortgage to cover the remaining 75% of the cost of the property. After the five-year interest-free period ends, borrowers will be charged a fee of 1.75% of the loan’s value. This fee will increase every year at 1% above inflation. These fees only count toward the Government loan and come on top of the mortgage repayments. Borrowers must pay back the equity loan when they sell the home or at the end of the mortgage period – whichever comes first.

“Help to Buy: Phase 2 will be available to both first-time buyers and existing home owners buying newbuild and older properties. Borrowers will need a 5% deposit, while the lender will be able to buy a guarantee from the Government covering up to 15% of the value of the property. This will make it less risky for lenders to offer a mortgage to a borrower with only a 5% deposit and should enable them to offer cheaper rates.

Both phases of the scheme are available on properties worth up to £600,000.

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