Could Help to Buy give you a hand? It's not just for first-timer buyers and could be a life changer for families looking to trade up
Families desperate to move up the housing ladder into bigger properties are being urged to take a close look at the Government’s Help to Buy scheme for low deposit buyers.
David Hollingworth, of Bath-based broker London & Country, says: ‘People associate Help to Buy with first-time buyers, but the scheme works just as well for second or even third-time movers who have been on the property ladder for some time.’
With big deposits still hard to acquire, couples who bought small, first properties a few years ago may find that Help to Buy is the only way to make the sums add up and get the bigger home they need now.
Country life: The scheme meant Marcus and Kerrie Courtaux, with son Theo, could afford to stay in Dorset
That was true for parents Marcus and Kerrie Courtaux, who used the Government scheme in the spring to move into a new three-bedroom home with a garage and garden where their 18-month-old son Theo has space to play.
It also enabled them to stay close to their roots rather than move to a cheaper area – and it means Theo can go to the same nursery school that Kerrie went to as a girl.
Kerrie, 27, currently on a year-long career break from her administrative role in children’s services at Dorset County Council, says the ability to stay local was a real benefit of Help to Buy. ‘We love Dorset and feel so lucky to live in Chickerell – right by my old school.’
The couple had lived in a small flat before Theo was born and Marcus refurbished a semi-detached home to try to build up enough equity to move into a home where they could stay for years.
‘Unfortunately, high prices meant we didn’t think we could stay in Dorset – or if we did, we thought it might take more house moves and refurbishments and several years to raise enough equity,’ he says.
The family managed to speed things up after looking at the Grey’s Field development from CG Fry & Son in Chickerell near Weymouth, where prices start at £278,000.
Picturesque: High prices meant the Courtauxs didn’t think they could stay in beautiful Dorset
‘CG Fry told us how to register for Help to Buy and put us in touch with a mortgage broker who took all the work off our hands,’ says engineer Marcus, 29. ‘He recommended a two-year fixed rate loan from TSB. Without Help to Buy we wouldn’t have got a place of this size and quality for years.’
So how exactly does the scheme work and how can it help other owners looking to move up the housing ladder?
What is Help to Buy?
It is a Government-backed scheme designed to help get people moving by offering them access to lower-rate mortgages than they might otherwise expect.
There are two different types of scheme (see below) and varying maximum loan sizes in London and other areas. Get more details at website helptobuy.org.uk.
How could it assist existing home owners?
Help to Buy has been heavily pitched towards first-timers. It allows people to buy with low, five per cent deposits and is designed to help people who do not have access to any cash from the Bank of Mum and Dad.
But the scheme can also be used by existing owners and since it began in 2013, almost two in ten applicants have been existing home-owners wanting to move up the housing ladder.
Why it helps those who want to trade up
Normally, because their first homes did not rise in value enough to give them sufficient equity for their next move – or because the price jump between, say, a one-bedroom flat to a two or three-bedroom house, is too large.
Figures from Zoopla and uSwitch show that the jump between a flat and a house is getting harder as typical flat prices have gone up by 15 per cent over the past decade, while typical house prices are up 21 per cent. In some towns the story is worse.
On the rise: In Colchester in Essex the typical flat has gone up by 13 per cent in a decade
In Colchester in Essex, for example, the typical flat has gone up by 13 per cent in a decade but the typical house is up 23 per cent.
In the worst case scenario, people who paid high prices for a starter flat may make a loss if they sold now, even though prices of nearby houses have risen.
If you had savings of £10,000 to buy a £100,000 flat, you only needed a 90 per cent mortgage and would have had a decent choice of lenders and rates.
Sell the flat for £97,000 and need to pay £130,000 for a house and after selling costs your maximum £7,000 equity means you will need a 95 per cent mortgage this time around – so you will probably need Help to Buy to get a decent loan.
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