Property in the UK has been creating waves in the media for quite some time. Headlines decrying the state of property prices, the increasing use of government-backed schemes and the burgeoning problems surrounding the percentage of rented properties are everywhere.
One of the most popular ways currently for individuals and families to get themselves a property of their own is through the Help to Buy scheme, which was launched in 2013 by the UK Government. On paper, the loan of 20% of the property value (40% in London) which helps them get a property, a mortgage and, seemingly, a future is perfect. But is that really the case?
What is the catch with the Help to Buy scheme?
Problems can arise for many property owners who take part in the scheme after five years. This is when 1.75% interest is added to the initial Help to Buy equity loan of 20% of the property price begins. This joins the normal mortgage repayments that homeowners are making each month. It can then become very easy to fall foul of this debt to the government; something that lenders can identify before they make any refinancing decision.
A Financial Times article suggested that just under a third of all lenders would offer remortgages to those who were yet to pay back their government loan. This narrows the field for those looking to refinance their property and skews the intention of the Help to Buy scheme with many spending more and having less options to choose from when refinancing.
Refinancing and remortgaging in the current climate
If you thought that mortgages, contracts, repayments and buying a property were confusing on the potential owner for those trying to refinance properties with minimal risk to their future. Mortgage advisers, therefore, have become less inclined to offer refinancing to their customers because of the complex nature of the proceedings and the chances of recuperating their funds.
Refinancing a property after owning and living in it for five years is now another stumbling block for those that want to enter the property market. Climbing the property ladder only to slide down a refinancing snake that you were not expecting is not how to build a prosperous property market.
What are governing bodies doing to aid Help to Buy property owners refinance?
UK Finance and Homes England are working in tandem to help create a solution to these issues which are making it harder for families to find a refinancing deal that suits them. Their view is to ensure that lenders for the Help to Buy market increase in the long term to help people when they need to refinance – something which is further hammered home by the commencing of government fees.
A pile of paperwork for the Help to Buy scheme may seem like a headache at the beginning but it is increasingly becoming evident that the problems exist further along the line for those seeking an entry point into the UK property market.
Impartial financial advice for individuals who need help with refinancing their Help to Buy property are in the right place at MacFarlaine & Brooks. Speak with our confidential experts about your specific problems today.