If you are considering buying a home in the near future, one of the options available to you may be the Help to Buy scheme.
This government scheme helps home buyers to buy a property with a deposit as small as 5% of the property’s value.
While this scheme has been available for many years, the government has recently announced changes that will make it an even better option for many home buyers. Here’s a look at what’s changed.
Changes Allow for Longer-Term Mortgages
The main change that has been made to the Help to Buy scheme (which was announced here) is that homebuyers can take out mortgages that have terms of over 25 years.
Under the existing scheme, homeowners had a fixed mortgage term of two to five years, and they could then remortgage after this period. However, when they remortgaged, they were effectively limited to mortgages with terms of under 25 years. This is because they received an equity loan from the government, and this was the length of time of that loan.
The changes that have just been announced to the Help to Buy scheme mean that the equity loan can now be extended to match the mortgage terms. This means that homeowners can now switch to mortgages with longer terms, which could mean mortgages with terms of up to 35 years.
Benefits of the Change
If the buyer’s remortgage is longer than the standard 25-year term for Help to Buy, the term will now be extended. The main benefit of this for homebuyers is that they can now spread out their mortgages over more years, and this can lead to a reduction in their monthly payments.
While a longer mortgage means that the borrower will end up paying more back in total, it also helps to make a mortgage more accessible by reducing the monthly payments.
It also means that more lenders will be able to provide Help to Buy remortgages, so there will be more choice for home buyers – and more choice is always a good thing.
This is particularly useful because there are now more longer-term mortgages on the market than before. In fact, the number of mortgages with terms longer than 25 years rose by 10% from 2017 to 2018.
Housing Minister Esther McVey said that the change was made to reflect how the mortgage market is changing, with more people taking out longer mortgages.
Indeed, longer mortgages are especially popular with first-time buyers, and the number of buyers taking out mortgages over 30 years has doubled over the previous decade.