Homebuy Direct Is It As Good As It Seems?

The HomeBuy Direct scheme announced by the UK Goverment last November comes into being this month and offers people who want to buy homes the ability to own 100% of their home with a combination of a mortgage on 70% of the value and an interest free loan from the taxpayer and the developer for the remaining 30%. On paper, if you’re eligible for this scheme it seems a good plan, however all may not be as it seems in the current market where prices are falling heavily each year, and the UK housing market predicted to be in freefall, given the reluctance of lending institutions to give mortgages, creating an environment where new and old properties are not moving.

Who is Eligible For HomeBuy Direct

The criteria seems simple. To be eligible for HomeBuy Direct, your household needs to be earning less than £60,000 per year. The scheme has been created to primarily help first time buyers, who are the drivers for the UK housing market, however you are not barred from the scheme if you have previously owned a home.

What Type of Homes Are Available

The homes available to buy under the scheme are new builds from property developers who take part in the scheme. Essentially property developers who sign up offer properties that they want as part of the scheme to buyers who wish to obtain them. It is not clear which areas of the country will benefit mostly from, the scheme and we will need to watch the news media for more information as the scheme progresses.

Is it a Good Scheme

Time will tell, however you may want to consider that at present the UK property market is declining. Prices are falling each month and mortgages are hard to come by in the open market. If this continues then we could see a property slump that trumps the last one (which incidently lasted 6 years).

If you bought a property today, you could begin to slide into negative equity quite quickly. Given the nature of the current decline in house price value, it is fair to say that should it continue for even 2-3 years, the value of your home will be less than the loan secured on it. As we know mortgage companies are currently enacting methods to repossess houses where this is the case.

If this were to happen, you would still have the mortgage, and the original loan to repay. As with all major financial decisions, you have to make the decision based on all the information available and based on past experience.

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