What is FirstBuy?
FirstBuy is a new Government-backed scheme designed to help first-time buyers on to the property ladder. With many aspiring homeowners struggling to raise a large enough deposit to qualify for a mortgage, the FirstBuy Scheme aims to help people get on to the housing ladder with a deposit of just 5 per cent. The scheme only applies to new-build properties in specific developments, the first of which will go on sale in September.
How does the scheme work?
Buyers with a 5 per cent deposit will be able to borrow an additional 20 per cent as an equity loan, which will be provided by the Government and developer. This will enable them to take out a 75 per cent mortgage.
The 20 per cent equity loan will be interest-free for five years. In the sixth year, interest will be charged at 1.75 per cent and at the RPI (Retail Prices Index) measure of inflation plus one per cent thereafter. When you sell, you will repay the 20 per cent loan relative to the property's value. If this has risen, you lose a proportion of the equity gained.
Who will it help?
To qualify, you will need to be new to the property ladder and receive a household income of less than £60,000 a year.
What are the pitfalls?
The Government says it will help 10,000 first-time buyers over the next two years. Critics claim that it is oversubscribed and will only scratch the surface of the housing problem.
Where can I find more information?
Final details have yet to be confirmed, but keep an eye on Homesandcommunities. co.uk. You will need to contact your local HomeBuy agent, usually a housing association, and register for the scheme.