Buying Your First Home
BY BUZZ
With the average house price in West Berkshire reaching over £300,000 (source, BBC House Prices Oct – Dec 2010) many people are questioning whether the dream of owning their own home is really a viable one. In Europe it is unusual for people to own their own houses and renters are much more commonplace. The main hurdle that prospective first time buyers have to overcome is saving enough money to place a deposit, which can be as much as 20 – 35% of the value of the property. This would mean that to buy an average property in West Berkshire, a prospepctive buyer would need a whopping £75,000 up front, in order to secure a mortgage.
However, the government is launching a new scheme, ‘FirstBuy’ to help first time buyers get on the property ladder by offering equity loans. If you are a first time buyer and the household earns less than £60,000, or are unable to otherwise afford a home in the area, you may be eligible. With an equity loan, you buy the property with at least 70% of the cost met by a combination of a mortgage and your deposit. The remaining 30% is paid for by the government through an equity loan. The government will get the same share of your home’s price when you sell it. You pay no fees on the loan for the first 5 years you own the home. This scheme means that it is ideal for people who are struggling to save enough money for a deposit, or those who would not otherwise be able to afford mortgage repayments.
For more information on this scheme, visit www.direct.gov.uk
I’m not sure what to think about the idea of the FirstBuy loan. It says that you give them back the same share when you sell the house, e.g. 30%. What happens if you sell your house for less than you buy it for? Do you have to pay the government the difference? Obviously if you sell it for more, the government will get a profit which is what they are hoping for, but in today’s housing market I’m not sure how realistic that is.