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Specialist mortgage advice in Lincoln

Specialist Mortgages

What is a ‘specialist mortgage’? Put simply, it’s a mortgage to buy a home in conjunction with some form of associated scheme. This may sound more complicated than it actually is, as all of the schemes are designed with the common aim of helping you to buy a home.

Below is a brief overview of each scheme. This is not an exhaustive explanation and you’ll probably still have questions such as:

  • What are the advantages of buying with this scheme, rather than without it?
  • Are there any disadvantages?
  • How do I apply?
  • How do I pay it back?
  • When do I pay it back?
  • Can I buy any home with it?
  • Do I still need a deposit of my own?
  • Do all mortgage Lenders accept all these schemes?

We can answer all the above queries and many more, based upon your specific circumstances, once we’ve met established your circumstances.

Help To Buy

The Help To Buy scheme is a government backed way to purchase your home. There were two schemes: The HTB Mortgage Guarantee and the HTB Equity Loan. However, the Mortgage Guarantee option ceased to accept new applications at the end of 2016.

The HTB Equity Loan scheme works by allowing you to have a government backed loan, of up to 20% of the purchase price. This is then used towards the deposit for a new home in return for which the government take a matching stake in your home, which has to be repaid at a later date. As it’s an equity share, the value of this stake could rise or fall over time in line with house prices as it’s expressed as a percentage of the value, not a set monetary amount.

You will pay a nominal interest on the equity share, currently after 5 years, until such time as the equity share is purchased back. There are limits on the value of the property you can buy, based upon where you’re buying, and you can’t use HTB if you already own another property, unless that property is being sold and the new one will be your new home.

Forces Help To Buy

Although named very similar to the government Help To Buy scheme, Forces HTB is a totally different scheme.

Available to members of HM Forces, and introduced in 2014 to replace the Long Service Advance of Pay (LSAP) scheme. Under the scheme, you are allowed to borrow up to 50% of your salary to help with the purchase of your home. Being salary and rank related, the loan amount available does vary from person to person though.

Paid back through your salary over 10 years, you are effectively borrowing from your employer to help you buy a home as well as from the Lender with who you’ll take a mortgage.

Shared Ownership

Buying a property with the help of a Shared Ownership scheme could be a way of getting onto the property ladder for a lower initial outlay.

In brief, you buy part of the home and rent the other part, with most schemes allowing you to buy the remaining share at a later date. As you increase your share of ownership, the rent on the remaining share decreases. It could be you buy a 25% share, renting 75%, on day one, then buying another 25% share after a few years to become 50/50, or you might actually buy 50% at the start.

Properties being offered for sale under a shared ownership scheme are usually done so through a local Housing Association, who will set the rules around what share can be purchased and at what point.

Shared Equity

A Shared Equity purchase is similar to the Help To Buy scheme in many respects. Your purchase is ‘subsidised’ by an equity share, typically up to 20% of the purchase price, which you ‘buy back’ at a later date.

Less common since the government HTB scheme was introduced, as Shared Equity schemes were offered by Developers looking to sell new homes. With the government now funding this type of purchase, Developers see no reason to tie up their own money in such schemes and in turn, this allows them to build more new homes.

Right To Buy

Someone looking to buy a property under the Right To Buy scheme will be an existing Council Tennant that would like to buy their Council Home. The home would be valued in a similar manner to any property but a ‘discount’ applied to that figure in order to give the tenant a reduced purchase price. The discount increases with the duration of tenancy but is usually capped – just under £80,000 outside of London at present.

You have to be a tenant for a minimum of 3 years to exercise the Right To Buy option and at that stage would qualify for a 35% discount of the value of the house (50% For a flat). Beyond 5 years, the discount increases by 1% per year, (2% on a flat) to a maximum of 70%

Once purchased, you can sell the property at any time but the discount has to be repaid in full if sold in the first year. This reduces by 20% per year such that it can be sold without repayment of any discount after 5 years.

Section 106 – Low Cost Housing

A far less common scheme you may encounter is a Section 106 purchase, referring to the provisions of the National Planning Policy Framework. Over a certain size of development, all builders are required to offer some properties under some form of an ‘Affordable Housing’ scheme. This could be achieved via one of the schemes listed above; Shared Ownership for example.

A property specifically referred to a Section 106 purchase though is different. In simple terms, you may buy it for 80% of its true market value but likewise, when you come to sell, it will be sold for 80% of its future value too. The initial percentage amount can and does vary in different areas of the Country and for different property types.

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