Summary

At this stage, the Governments “Homebuy” mortgage scheme for first-time buyers seems a waste of time. This article explains why.

 

 

Mortgages. First-time buyers let down by the governments Homebuy scheme.

  (life assurance)

Author: Michael Challiner

 

Late last year, accompanied by the usual razzmatazz, Gordon Brown announced the Governments new “Open Market Homebuy” mortgage scheme for first-time buyers. (medical insurance)

Under the Homebuy scheme, first time buyers take out a mortgage for 75% of a homes value with no deposit and the Government and the mortgage lender will in practice buy the remaining 25% of the property. Then when the borrower eventually decides to sell the property, the borrower will receive 75% of the net sales proceeds and the remaining 25% of the sale price will go to the Government and the mortgage lender. In the mean time, if the owner wishes to buy out all, or part, of the Governments or mortgage lenders 25% interest, the borrower can simply repay the money the Government and mortgage lender initially put in.- there will be no penalty.

In our view, first time buyers shouldnt become too excited about this scheme for six reasons: -

•  The Government has recently confirmed that buyers will have to pay a 1% premium on top of the usual mortgage rate.

•  There has been no announcement as to the amount relative to income, insurance ) which borrowers can qualify for. So at this stage its impossible to judge what sort of house a first-timer could buy. However, we bet its a very small one! (remortgages)

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