Buying a new home can be extremely tricky, but luckily we have government schemes to help, right?
The new Help to Buy: Equity Loan (2021-2023) scheme has recently started, for which first-time buyers interested in new-build homes can apply. With the new loan, the government lends homebuyers up to 20 per cent (or 40 per cent in London) of the cost of a newly-built home, with customers just having to pay a deposit of 5 per cent or more, as well as arrange a minimum mortgage of 25 per cent to make up the rest.
The loan is interest-free for the first five years, then there is a 1.75 per cent interest rate from year six, which will rise by inflation annually.
Eligible first-time buyers will be able to reserve their homes from mid-December and be able to move in from April 1st, so with regional price limits, set at 1.5 times the average first-time buyer price in each area in England. Of course, homes in London are more expensive and so the price cap is £600,000, where as those in the north east have a price cap of £186,100.
However Martin Lewis isn't completely happy with the new set-up (uh-oh), and issued a stark warning on his new money show on ITV.
The finance guru explained that when you take out an equity loan, it means the government owns a part of your new home, and if property prices rise than it means you must repay more plus interest.
Confused? Us too.
Basically, if your equity loan is equivalent to 20 per cent of the value of the property, the government owns this percentage until you repay the loan. That means that if the property value rises, the government will own 20 per cent of the new amount, leaving you with more to pay back
He said: "The government loan that you get is interest free for five years - that's great. But after that it charges interest.
"1.75 per cent from that first year (sixth year) and then it goes up by inflation each year after that."
While we're sure the scheme will help many aspiring first-time buyers get on the ladder, it's something to keep in mind.
Featured Image Credit: PA