I hear you gasp at the headline but take a deep breath and read what we have to say.
Yes COVID-19 has depleted our usual way of life and in the mortgage lending world there have been lenders coming back and forth onto the market with different products, criteria and crucially tightened restrictions on the deposit required for a new property purchase
Below are some key areas where you can still purchase your home with as little as 0-5% deposit.
Right to Buy Scheme
Can I purchase a property with no cash as a deposit?
Are you a secure or flexible tenant? Been a council or housing association tenant for at least 3 years in total? This does not have to be continuous or in the same property, time spent in armed forces accommodation also counts.
If the answer is yes to the above, you may qualify for the scheme and you can purchase the property you reside in. The discount given to you can act as the deposit with many lenders offering this.
The maximum discount is £84,200 across England, except in London boroughs where it is £112,300. It will increase each year in April in line with the consumer price index (CPI).
If your property is a house, you get a 35% discount if you have been a public sector tenant between 3 and 5 years.
After 5 years the discount goes up 1% for every year you have been a public sector tenant.
If your property is a flat, you get a 50% deposit if you have been a public sector tenant.
After 5 years the discount goes up 2% for every year you have been a public sector tenant between 3 and 5 years.
The full scheme is only available in England. If you live in Scotland, the Right to Buy scheme has been abolished completely, while Right to Buy was also phased out in Wales in January 2019.
So as the title says this is not a cash deposit so if this something that applies to you contact a whole of market mortgage broker who can guide you through the process.
The NEW Help to Buy scheme
Do you have cash for a 5% deposit? If the answer is yes, the Help to Buy scheme may be perfect for you!
While you contribute the minimum of a 5% deposit the government will provide the remaining 20% as an equity loan or 40% if you live in London.
You then borrow the rest (up to 75%, or 55% if you live in London) from a mortgage lender on a repayment basis.
The new scheme began on the 16th December 2020, and will run until 31st March 2023. The equity loans will not be available until 1st April 2021, which means you will not be able to complete until this date. Unlike the original scheme which was open to home movers as well as first buyers this new scheme is exclusively available to First Time Buyers.
The other major change in the Help to Buy scheme is that it has regional price limits, set at 1.5 times the average first-time buyers price in each region in England. This keeps the prices of new homes closer to the average regional first-time buyer property prices, reducing the amount that first-time buyers need to borrow.
Here is how the new regional limits look:
Paying back the equity loan
There is interest payable on the equity loan and strict criteria around re sale and repaying the loan.
For the first 5 years:
- the equity loan is interest free
- you pay a £1 monthly management fee bt Direct Debit
From year 6:
- pay the £1 monthly management fee
- pay monthly interest fee of 1.75% of the equity loan
- interest rate will rise each year in April by the Consumer Price Index(CPI), plus 2%
- continue to pay interest until you repay your loan in full
When you take out your equity loan, you agree to repay it in full, plus interest and management fees.
You must repay your equity loan in full:
- at the end of the equity loan term
- when you pay off your repayment mortgage
- when you sell your home
- if you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full
The amount you pay back is worked out as a percentage of the market value at a time you choose to repay.
If the market value of your home rises, so does the amount you owe on your equity loan.
And if the value of your home falls, the amount you owe on your equity loan falls too.
If Help to Buy is something you are keen on please seek advice from a whole of market mortgage broker.
Let us help!
We can also help your home purchase get underway by helping you to find the most suitable mortgage
Your home may be repossessed if you do not keep up repayments on your mortgage
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