Government Launch NewBuy Scheme to help First Time Buyers

NewBuy Scheme to help First Time BuyersIf you have had problems obtaining a mortgage because you cannot afford the large deposit most mortgage companies insist on these days, you may be interested in a new government scheme called NewBuy, that allows you to purchase a mortgage with only 5% deposit.

This NewBuy scheme is specifically designed to help overcome the deposit gap for first time buyers and is aimed at new home buyers and those who already own a home, but who only have funds for a 5-10% deposit on the home they wish to buy in England.

There are lenders that are participating in the NewBuy scheme that will provide a 90-95% loan-to-value mortgage for buyers meeting their qualifying criteria. So far, Barclays, Halifax, Nat West, Santander and Nationwide have signed up to the NewBuy mortgages.

These banks and building societies are working in partnership with the Government and the NewBuy scheme is being operated by the home building industry. This scheme is designed to protect the mortgage lenders against losses in the unfortunate event of a repossession, which is why they are prepared to make 90-95% mortgages available. However, this does not take away any of the responsibility from the borrower to repay the mortgage in any way.

Builders building a new homeAt present, the NewBuy scheme is available in England on all the properties offered by home builders participating in the scheme up to and including a sale price of £500,000.

There are separate schemes are currently under consideration in Scotland and Wales. Only new homes built by house builders signed up to the NewBuy scheme will qualify, but most major and many smaller builders are in the process of registering. The way the NewBuy scheme works is that individual home builders will partner up with one or more mortgage lenders who will offer 90-95% loans on their properties.

New home buyers wishing to take advantage of the NewBuy scheme will need to qualify for a mortgage with a mortgage lender in the usual way and be subject to the lender’s normal assessment criteria. However, whereas in recent years lenders have generally required larger deposits, the NewBuy scheme will allow loans to be secured at 90-95% of the property’s value, meaning the purchaser only needs to find a 5-10% deposit.

New homes under NewBuy SchemeYou can check the web sites of home builders offering NewBuy – listed under ‘Home builders offering NewBuy’ – to see if they are building in your area, or pop into the sales office of any home builders building in your area and ask if their homes are covered by the NewBuy scheme.

If you have then found a house that you are considering purchasing, you should then either speak to an independent financial advisor who will assess your mortgage requirements and advise you on the best mortgage product for you, or speak directly to a lender participating in the scheme. If a NewBuy mortgage is suitable, the next step will be to apply for a mortgage with the appropriate lender. Once you have your mortgage offer and you have reserved your new home, you are on the way to becoming a proud new home owner.

As with any new scheme, the NewBuy scheme does have some requirements that you need to be aware of:

  • Mortgage adviser with first time buyerIt is only available to UK citizens and those with a right to remain indefinitely in the country;
  • It covers full home ownership only, so is not available for shared equity or shared ownership;
  • It is available for the purchase of a person’s primary home only, so not for second homes or investment or buy-to-let purchases;
  • It only applies to capital repayment mortgages, not interest-only mortgages;
  • You must not be receiving help with your deposit from a local authority or other public body.

If you are interested in finding out more about the new home sites in your local area offering NewBuy, please refer to your local home builders. The home builders offering NewBuy are listed on this web site under ‘Home builders offering NewBuy’. Alternatively you can Google search to find participating home builders, or you might like to refer to one of the property search web sites such as New-homes.co.uk or Rightmove.co.uk.

Further information on what you need to know when considering a NewBuy mortgage can be found on this page http://www.cml.org.uk/cml/consumers/newbuy.

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