The government is to assist potential homeowners to get on the housing ladder, in a radical new incentive announced by Communities Secretary Eric Pickles this week.
Under the new ‘Rent to Buy’ scheme, those wishing to buy their homes but currently without the necessary capital, will be able to rent a property for up to seven years, at a discounted rent, with a view to buying the home after that.
Rent will be capped at 80% of market rental value, with the aim being that future homeowners have the means and the time to save up the required deposit through reduced rents.
“This Government is standing by people who work hard and do the right thing, and helping them move on and up in life” said Pickles.
“As part of our wider housing programme, this new scheme will help increase the provision of low-cost rented accommodation and provide a springboard for young people to upgrade to home ownership down the line.”
“The smallest increase in mortgage repayments can make a significant impact on a family budget – especially for those people who are already financially stretched. So it’s a good idea to review your personal finances, start looking at where you can cut back, and plan ahead now” said Nick Hill, money expert at Money Advice Service.
“Rent to Buy appears to be able to bridge the gap to homeownership for those whose financial picture is due to change in the near future, by ensuring that buyers are financially prepared for their new mortgage commitments, as well as having real knowledge of the cost of maintaining their home” says Simon Butler, senior consultant at specialist broker Contractor Mortgages Made Easy.
“Some of the financial difficulty that homeowners experience comes from not being fully prepared for the running costs of owning, rather than renting. This scheme allows people the opportunity to ‘try before you buy’ to a certain degree.”
Reaction to the proposed scheme has met widespread approval from mortgage professionals, with many brokers reacting positively to the scheme’s announcement.
“On the face of it this seems to be a tremendous idea” says Satvinder Singh, Managing Director of Contractor Mortgages Made Easy. “The Help to Buy scheme has been criticised for still leaving some potential homeowners out in the cold, and this appears to tick all of the boxes, it’s a great idea.”
Whilst no details of participating mortgage lenders have been announced at these early stages, Contractors can expect to be able to access the scheme, similar to the previous incarnations of government home-ownership schemes. There is however a word of caution, says Sat.
“Contractors do have access to Help to Buy at present, so we would expect that it would be similar in terms of the mortgage potential in the market. It would be wise to check out your mortgage options early however as this may be a very popular scheme, and the government funding towards rent discounts will not last forever.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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