Government to extend FirstBuy scheme
Boost for first-time buyers unable to afford a deposit
September 6, 2012
David Cameron announced a further £280 million worth of funding for the FirstBuy scheme, to be matched by housebuilders. It is hoped that this will enable 16,500 first time buyers buy a newly-built home. The original scheme was launched with a £210 million backing from the government and has now been extended to March 2014. The government now hopes the funding will enable over 25,000 people to purchase their first home.
Under the scheme first time buyers are given a interest-free equity loan of 20 per cent of the value of the house. This means that you will own 80% of the property and the government and homebuilder will own up to 20% of the property. The consequence of this is that if house prices rise and the value of your property increases you will still owe 20% of the value of the property – which will now be more than it was originally. On the other hand if prices fall you will also still owe 20% – which will be less than it was originally.
The buyers will have to stump up 5 per cent of the deposit, plus other fees. The loan is interest-free for the first 5 years, after which the rate slowly increases to encourage you to pay back the loan. To find out more about how the scheme works and who is eligible, read our guide on What help can I get from the government.