As you’re probably already aware, since the 2008 recession and the tightening of lending requirements by banks and mortgage lenders, more and more people have found it difficult to get on the property ladder. It’s not all bad news though, if you’re looking to buy your first home or even considering buying your next one there are now even more options to help you on your way.
Below, Helen Barry, Partner, Solicitor and Head of Residential Conveyancing at QualitySolicitors Rubin Lewis O'Brien explains some of the new choices available, along with their legal implications.
Help to buy schemes can provide a much needed lifeline if you have what is now considered to be a small deposit. It’s worth bearing in mind though that the conveyancing and legal work required when using such a scheme can be more complicated and your rights will need to be clarified.
There are a number of ‘help to buy’ or ‘shared ownership’ schemes available including the government’s Help to Buy Scheme which was announced earlier this year.
The new Help to Buy Scheme provides two options:
1. Equity loan for newly built homes – available since 1 April 2013. If you have a deposit of 5% you can apply for a loan of up to 20% of the value of the home from the government. The loan is then interest free for the first five years. After that you’ll be charged a rate of 1.75% which will rise with inflation. You can pay back the loan at any time, you can even wait until you sell the property. This scheme is available to first time buyers and movers, you don’t have to be on a low income and loans are available for properties worth up to £600,000.
2. Mortgage guarantee for all properties – funds will be made available from 1 January 2014, but applications can be made from 7 October 2013. If you have a deposit of between 5%-20% the government can offer to guarantee part of your mortgage. This is to help you get access to mortgages with lower interest rates, normally only available to those with bigger deposits. This scheme is available to first time buyers and movers, you don’t have to be on a low income and loans are available for properties worth up to £600,000.
The legal side of things
However you choose to buy your home there will always be a number of legal tasks which need to be completed by a solicitor. Even more so if you decide to use a ‘help to buy’ or ‘shared ownership’ scheme.
The additional paperwork and extra legal time will usually mean there will be increased conveyancing costs. A good solicitor will always be happy to discuss this with you before they start work and agree the final cost upfront. At QualitySolicitors we provide a Free Initial Assessment service, so you can call us for a chat to find how we can help and the costs involved, without any obligation to use us further.
Just because there is extra work involved for your solicitor, it doesn’t mean it will take longer to complete your house purchase. The additional steps and paperwork needed can usually be dealt with during the course of the purchase, making sure there are no delays for you or the seller.
When you come to sell
If you used the Help to Buy Scheme’s equity loan you can sell the property at any time, but unless you’ve already repaid it, you’ll need to pay back the money lent to you under the scheme. Your solicitor will contact the scheme to get a settlement figure and provide them with details of the sale. Once the sale has been completed, the loan will be paid off from the proceeds and your solicitor will arrange for the scheme’s interests to be removed at the land registry.
If you used the Help to Buy Scheme’s mortgage guarantee, you and your solicitor can follow the normal home sale process without having to do anything differently.
Your rights and responsibilities
Buying a home, however you choose to finance it is a massive commitment. So if you’re using a ‘help to buy’ or ‘shared ownership’ scheme, it’s important you ask your solicitor to check exactly what your rights, responsibilities and limitations are. For example if you use a shared ownership scheme, you may want to check to see what happens if you decide to make any improvements to the property. Will you have to ask permission before you start work? And what happens if the improvements you make (and pay for) mean a higher sale price – who will benefit?
Just like a normal home purchase, your solicitor is there to help you. They can advise you on all aspects of your contract and point out any important clauses you need to be aware of, so you know exactly what you can expect and what’s expected of you.
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