First-time buyers' guide to FirstBuy
Friday, 1 July 2011 11:50 AM
Housing minister Grant Shapps first announced his plans to launch FirstBuy, a shared equity scheme for first-time buyers, back in March. Now the dust has settled, we look at how FirstBuy works, who qualifies, how much money you'll need (and receive) and the sorts of properties you'll be able to buy under the scheme.
What is FirstBuy?
FirstBuy is a shared equity scheme designed to help first-time buyers onto the property ladder by helping out with the deposit. It will be available to approximately 10,000 households from September 2011.
Who can buy a home through FirstBuy?
The scheme is aimed at first-time buyers whose total household income is under £60,000. Housing minister Grant Shapps has also said that priority will be given to armed forces personnel.
How much of a deposit do I need?
FirstBuy requires buyers to put up a five per cent deposit. You can then receive an equity loan of up to 20 per cent which is split equally between the Government and the property developer. This means that, if you receive the full 20 per cent, you can apply for a 75 per cent loan-to-value (LTV) mortgage.
Do I have to pay interest on the equity loan?
The loan is interest-free for the first five years; after that you'll pay 1.75 per cent interest in the sixth year and Retail Price Index (RPI) inflation plus one per cent from the seventh year onwards.
When do I pay the money back?
You need to repay the loan when you sell the property or after 25 years (whichever comes first). Because this is an equity loan, you will need to pay back 20 per cent (or whatever percentage you were originally lent) of the property's market value at the time of repayment. This means that the Government and developer will receive a share of any profit made.
Can I buy any house through FirstBuy?
FirstBuy is only available on new properties that have been built by an approved developer, and the house or flat must cost £280,000 or less.
Is FirstBuy available throughout the UK?
When FirstBuy was launched, George Osborne pledged £250 million towards the scheme, with £210 million going to buyers in England, and £40 million to be shared between Wales, Scotland and Northern Ireland. However, it came to light last week that £30 million-worth of funding has been pulled from the scheme. It isn't yet clear whether the split between countries will remain proportionately the same.
Those living north of the border might be interested to know that Scotland's housing minister Keith Brown recently announced plans to launch an additional scheme to help first-time buyers, which is likely to be similar to HomeBuy.
How do I apply for FirstBuy?
Check out the Homes & Communities Agency's website to find out who your local HomeBuy agent is and register your interest as soon as possible.
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