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Posts Tagged ‘Homebuy Direct’

If you are wondering whether or not it is possible to secure cheap London mortgages without a sizeable deposit, do not fear. The days of 100% loans to buy a home may be gone, and lenders may seem less reluctant to take a risk, but there are plenty of ways for Londoners to secure an affordable mortgage.

It comes as no surprise that properties in the capital are generally more expensive than elsewhere in the UK, but for Londoners, home is where the heart is, and a city based residence is worth much more than bricks and mortar. One of the ways of buying a home if you are on a low income and you are a first time buyer is to apply for a Government loan scheme called HomeBuy Direct.

HomeBuy Direct is an equity loan scheme that is funded by both the Government and by housing developers to enable low income individuals to purchase part of a new build property. Essentially it means that if a buyer earns less than £60,000 they are eligible to borrow up to 30% of the deposit needed to secure a mortgage from a mainstream lender of up to 70% LTV. The loan is only available to those who want o purchase a minimum of 25% of a property, although it is possible to use it to purchase an entire residence, but you must be a first time buyer.

It is a way for low income first time buyers to get a foot on the property ladder, but it may not end up being the cheap mortgage deal that Londoners are after. Because the HomeBuy Direct scheme is an equity loan, it essential  means that the Government and the housing developer will own as much as 30% of your property, and if you have not had the funds to pay this back whilst repaying a 70% mortgage, you could face paying out big time to buy back that portion of your home.

This is because the equity loan is tied in to the market rate, so what you will owe will be proportional to the increase in your house value. Never-the-less, it is a good idea for many Londoners, and is certainly a way to secure a place to call home, something that is impossible to do with a rented property.