What Is the Best Government Scheme for First Time Buyers?
What is the best government property scheme?
With the mortgage indemnity scheme coming out in March 2012 first time buyers have more choice than ever for government assisted move programs than ever before. This article will show potential users of the schemes the benefits and negatives or both the mortgage indemnity scheme and first buy so that purchasers know which scheme fits them best.
The current scheme is first buy which is a scheme that is open to everyone apart from people who already have a mortgage and property investors. The key points are:
• Only need a 5% deposit. Purchasers can choose to put a 5% deposit down on the amount minus the 20% loan or on the full purchase amount. If they put down a 5% deposit on the full purchase amount then they would get a better interest rate. Pradhan Mantri Yojana
• Only need a 75% mortgage. This makes properties more affordable for purchasers and means that they can buy a bigger property than they would purchase through a normal mortgage.
• Interest free for 5 years 20% equity loan. This acts as a deposit so that banks are willing to take a risk and lend to what they class as a higher risk client. The loan has to be repaid within 25 years.
• Only available on new build property.
The new government property scheme is the mortgage indemnity scheme and again is open to everyone apart from property investors and people who currently have a mortgage. The key points are:
• Only need a 5% deposit.
• 95% mortgage which is underwritten by the government.
• Only available on new build
As you can see the only real major difference is that with first buy scheme you get a 20% equity loan. There are two ways you can look at that and allot depends on what the property market conditions do over the next 12 or so month. As the loan is an equity one and the value will change with the price I would be inclined to take that option if you want to eliminate more risk if you think the property market will go down. This would safe guard your investment more than a 95% mortgage as you only have 5% worth of equity in the property.
On the other hand though if you think the property market is going to go up over the next few years then the mortgage indemnity scheme would be better as you own 100% from day one.