The government has dropped a bomb shell and outlined an aggressive scheme known as the Home Buy Scheme which is designed to help first time home buyers onto the property ladder.
Tax payers money will be used to help first time buyers buy their first home.
Because of the credit crunch there are thousands of new homes that are vacant and the developers are not able to sell these homes unless they give them away at bargain prices. But are they really a bargain? Take a look at prices and some have halved in value, which only shows just how overpriced they were in the first place.
Although a nice new flat or home is great to move into be very aware of the tricks offered by developers. Free carpets, kitchens and other lures look good to most buyers and the advantage of 2 years rental cover or stamp duty paid also help investors over the line but think, look and research hard to see what are the REAL values of these properties? Take a look at the Gumtree.com to check against a wealth of real asking prices in the area, the Gumtree offers an excellent guide to real life rental values. Where does your proposed investment sit between these other offers, be realistic.
Once again be very aware of flats with no land. Land is the key to value as supply of flats with no land can easily be diluted with another 10 storey residential block being built right next door. There is little scarcity in flats with no substantial outdoor space.
Critics say that new initiative may end up backfiring and the very people it is supposed to help and they could end up in negative equity. However the scheme allows you not to pay back the loan if the house drops in value when you sell it. If the house goes up in value you must pay the full loan back.
When the economy was booming it was not uncommon practice for the banks to offer 100% mortgages or more. Now the Home Buy scheme allows people with a household income of less than £60,000 to borrow the deposit from the government. Also the property developer matches the government to make up the deposit.
So first time buyers would receive a 100% mortgage.
It is likely the government will make first time buyers meet strict requirements in order to be eligible for financial assistance.
This scheme sounds too good to be true or is it?