Government loans for first time buyers

loopylisa87

Can anyone enlighten me as to what these loans that were announced today are all about. there seemes to be a lot of info on the stamp duty increase but not a lot on this. Me and my partner are desperate to buy and earn a combined income of £35K, i am a graduate and a keyworker (however there is no keyworker scheme in the area at the moment)
what are the pros and cons of them and what criteria needs to be met to be eligible?
Any info would be greatly appreciated

russelleng

I've been trying to find this out myself, as you said, a lot of the general press articles have focused on the stamp duty threshold and the initial press release from the Communities and Local Government department was vague on the funding, eligibility and final costs of the scheme

http://www.communities.gov.uk/news/corporate/950558

Earnings threshold is in that release

As with other HomeBuy schemes, any first-time buyers whose household income is under £60 000 will be able to apply.

Also in the release is the fact that this will be limited to 10,000 people

HomeBuy Direct, a £300 million scheme which will help up to 10 000 first time buyers into affordable homeownership over the next two years.

The only further details on the costs I have seen are in this Times Online Q&A, which seems to suggest that after 5 years it reverts to a 3% interest rate and at 10 years something linked to base rate.

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4660581.ece

I think the fact that the developers will be partly funding the loan may limit the amount of info that can be released to people who aren't applying, if the scheme is across different developers it could be commercially sensitive.

The first big question I have is if any mortgage lenders will offer compatible products that treat it as a 30% deposit (i.e. rates and fees similar to 70% LTV products)?

The second is how you pick which 10,000 people are eligible, are the houses that will qualify for the funding already picked and it will just be the 10,000 who choose to buy them?

wymondham

Just a thought - if you'd previously sold up and rented, would you now be considered a first time buyer for this scheme ?

I can't seem to find a definition of First Time Buyer....

getmore4less

I think people will be buying trouble,

This is to bail out developers that have excess stock on their hands.

All the shared ownerships schemes have just helped keep prices up.

In most areas renting houses is cheaper than renting the money to think you own one.

And that is before you account for the upkeep costs.

koexelek

I read on the government site yesterday, that if you were not a keyworker ( just a first time buyer who could not buy otherwise) your only mortgage option is coop bank


http://www.communities.gov.uk/housing/buyingselling/ownershipschemes/homebuy/openmarkethomebuy/

lethal0r

so the "free loan" has a fee & also accumulates interest. sounds a bit like a mortgage that...

russelleng

Thanks to a bit of quick browsing from the link koexelek provided we have the details of the actual new scheme which is branded Homebuy Direct

http://www.communities.gov.uk/housing/buyingselling/ownershipschemes/homebuy/HomeBuyDirect/

The key details are...

Developers will shortly be invited to submit bids to the Housing Corporation to offer HomeBuy Direct on selected properties and sites. Bids will be competitively assessed against criteria that will be published in due course.

As with the other HomeBuy products, the 23 regional Homebuy Agents will be the first point of contact for First-Time Buyers who are interested in applying for the scheme.

The equity loan will be co-funded on equal terms by Government and by the developer supplying the property.

The equity loan will be free of charge to the purchaser for the first five years. From year six, a 3 per cent charge will be levied. From year ten onwards, the Bank of England Base Rate will be charged, increasing by RPI plus 0.5 per cent each year.

If the value of the property has increased by the point of sale, the buyer, the developer and Government will all share in this increase.

If the value of the property has gone down, Government and the developer will only share the sale proceeds that are left over once the mortgage has been repaid.

Although the scheme is targeted at First-Time Buyers, HomeBuy Direct could also help people who have previously owned properties but are now unable to buy without assistance, for example in the case of relationship breakdowns or families who are over-crowded in their existing homes.

We expect that the first HomeBuy Direct homes will be available to purchasers early in 2009.

Dylanwing

Sounds like the usual spin with little substance. It seems to be aimed at helping house-builders, so that the mad 5 year plan to build ? million new homes (Whilst ignoring the unoccupied council owned properties, highlighted by Despatches on C4) can proceed. And how many BTL'ers and second home buyers will manage to exploit this scheme?

koexelek

Dylanwing wrote: »

Sounds like the usual spin with little substance. It seems to be aimed at helping house-builders, so that the mad 5 year plan to build ? million new homes (Whilst ignoring the unoccupied council owned properties, highlighted by Despatches on C4) can proceed. And how many BTL'ers and second home buyers will manage to exploit this scheme?

To me, one of the the biggest winners looks like Co-op Bank .

They have obviously clinched the monopoly on the mortgages.
Perhaps they were the only lender prepared to do it though ?

ManAtHome

Opportunity to pay full price (eventually) for selected crap they can't sell instead of getting a 20% discount? Oh, and there's the infamous "fee" (details to be announced possibly before you sign up?) which will be left to the next government to collect during the run-up to the next-but-one election...

[edit] don't the co-op bank advertise themselves as ethical??

theGrinch

these negative equity loans are encouraging people further into debt.

shame on you mr brown.