Government mortgage schemes and starter homes explained

One of the common questions surrounding Government-backed mortgage schemes is ‘do I own the property?’ Below our experts answer your questions and explain how two of the most popular initiatives work.


Starter Homes


This year, the Government announced a new Starter Homes Initiative in England that aims to help young first-time buyers aged below 40 to purchase a home with a minimum 20 per cent discount off the market price.


The scheme has been established to reduce or do away with some of the costs that builders are asked to pay to local authorities when they enter into planning agreements. The hope is that by doing so, it will enable builders to sell properties for reduced sale prices.


A property which falls within the definition of a starter home will not be able to be resold for market value for a fixed period of time making sure that the savings are passed on to home buyers.


There is criteria which will need to be satisfied.  For example, starter homes will only be able to be built on designated starter home developments and will be subject to specific design requirements. The scheme won’t be available in all areas – it will depend on whether suitable land is available and if the local authority signs up.


People who do meet the criteria and use the Government scheme to purchase the property will own it subject to a provision that you cannot sell at full market value for at least five years after it has first been sold after construction. At the expiration of that five year period, you should be able to sell for market value.


The new home scheme can only be accessed by registering on the Starter Homes Initiative website.


Help to Buy


If there aren’t sufficient starter home schemes in your area, there is another way to get yourself on the property ladder. The Government has extended its Help to Buy mortgage scheme which aims to make mortgages for people with small deposits more affordable.


Help to Buy mortgages are available for loans of between 80 per cent and 95 per cent of a property’s value. The buyer is only required to raise 5 per cent of the property value as a deposit. The Government will stump up a further loan of up to 20 per cent through the Homes and Communities Agency (HCA). With a combined deposit of up to 25 per cent, you will then have access to more attractive mortgage rates from lenders participating in the scheme.

The benefit of using a government loan is that there are no loan fees for the first five years of owning your home. In the 6th year, you’ll be charged a fee of up to 1.75 per cent of the loan’s value. After this, the fee will increase every year in line with the Retail Price Index, plus a per cent.

You do own your home under Help to Buy and so you are able to sell it but you’ll have to pay back the equity loan when you sell your home or at the end of your mortgage period – depending on which comes first.


Also be aware that the guarantee is only for the lender. As the mortgage borrower, you are responsible for the full mortgage amount and your home could be repossessed if you get into arrears.


With both options you still require a solicitor to take you through all the complex paperwork and legal documents. A legal expert will also push to get your contracts exchanged on time. You may also want to instruct a survey on the property and make relevant searches as this is probably the largest transaction you will ever make.


For further information on WHN’s legal services and fees on buying or selling a property call:


Mathew Simkin at our Accrington office on 01254 236221

Claire Birch at our Bury office on 0161 761 4611

David Buskey and Stephen Parr at our Haslingden office on 01706 213356

Elizabeth Kelly at our Rawtenstall office on 01706 244400