Is ‘Help to Buy 2’ right for you? A quick guide from unbiased.co.uk and its expert panel of professional advisers
With so much buzz around the ‘Help to Buy 2’ scheme it can be easy to get swept up in the excitement of 95 per cent mortgages and picking out your dream house but should you rush to buy now or consider your options? Unbiased.co.uk, the ‘find a professional adviser’ website and its expert panel of professional advisers have put together a quick guide to answer the questions you might be asking.
1. Karen Barrett, Chief Executive at unbiased.co.uk – How do I know if Help to Buy 2 is right for me?
“There are so many factors to consider in buying a house and being able to afford the deposit is just one element of the process. You also need to think about fees, valuations, stamp duty, legal fees and identifying the best mortgage for your situation. Help to Buy 2 is providing a fantastic opportunity for people to get on the housing ladder but the basic house-buying principles still apply. The only way to know if this is the right option for you is to speak to a professional adviser who can look at your whole situation, explain your options and advise you on the best mortgage. To find a whole of market mortgage adviser or a whole of market financial adviser simply go to www.unbiased.co.uk and enter your postcode.”
2. Simon Webster (Facts & Figures Financial Planners) – Should I rush to get on the market now or wait to see what other product providers come out with?
“A 1 per cent interest charge on a £150k loan is £1,500 over a year, while a 5 per cent increase on a £175,000 house is £8,750. So if you think a one year wait might save you 1 per cent that year, you also need to consider whether the house will have gone up in price in your area over the period that you wait. In the South East prices could well rise by 5 per cent or more over the next 12 months; but I am less confident about prices further north as there are huge regional variations and a hard and fast rule is dangerous. It’s much better for people to do the math with an adviser based on their own situations.”
3. David Hollingworth (London & Country Mortgages) – What should I think about when looking at the Help to Buy 2 products available now?
“You should obviously consider the rate but don’t forget the key foundations of factoring in fees as well. So far some deals are charging no fee whilst others will come with a fee of £995. Beyond that, you need to also consider how long to lock in for. Fixed rates are likely to be the popular option (so far the only option) but some borrowers may like to fix for only 2 years to get a lower rate now but also in the hope that they can drive the mortgage down and jump into a lower banding at the end of the fixed period. Others will much prefer to know where they stand with the peace of mind of a 5 year fixed rate. That will give them certainty of payment no matter what is happening with interest rates and house prices.”
4. Ray Boulger (John Charcol) – I’m close to a 10 per cent deposit, is it better to wait?
“It depends how close you are to reaching the 10 per cent. For buyers at over £250,000 having to find at least 3 per cent stamp duty will already be a further challenge. The trade-off between waiting to bring the deposit up to 10 per cent will be the much cheaper rates and greater choice of lender, and hence criteria, available at 90 per cent loan to value (LTV) against the likelihood of having to pay more for the property by waiting.”
5. Andrew Richards (Plutus Wealth Management) – What happens if I decide to wait?
“If you are planning on waiting and seeing how the scheme runs and what other products come out then use the time as preparation for when you are ready. Things like having your mortgage agreed in principle based on current employment status and making sure you have checked your credit file is up to scratch are things that will help put you in good stead.”
6. Danny Cox (Hargreaves Lansdown) – What else should I think about?
“Buying your first home is highly emotive and it is easy to be distracted and make quick decisions in haste which you may regret later. Certainly in the South East where the housing market is fast moving this is more likely, however where possible, it’s important to do your homework and as much preparation as you can beforehand. Key to the process is to understand how much you can afford both now and when interest rates rise – which they are sure to do.”
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