The plain facts about the Government’s NewBuy scheme

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Q: I’ve heard so much about the Government’s NewBuy scheme for first-time buyers, but what exactly does it mean?

A: So many people have asked me about this and I must stress this applies to new builds only.

The NewBuy scheme is a Government initiative designed to give first-time buyers, with limited deposits, access to mortgages. It is an initiative whereby lenders and the government underwrite a mortgage but it is subject to the following criteria:

The scheme is only available to purchasers of new build houses or flats, priced up to £500,000

Purchasers may be first-time buyers or those already on the property ladder

Purchasers must be UK citizens or those with a right to remain indefinitely in the country

The scheme is only open to those purchasing their principal home

The scheme is not available for shared ownership or shared equity purchases

This doesn’t mean every new build and every mortgage provider is available to you. It only applies to those developers and mortgage providers who have signed up to the scheme.

Currently the Halifax, Nationwide, NatWest and Barclays have unveiled their range of mortgages under the scheme with Santander likely to join by summer.

Not surprisingly, not all of these lenders have linked with all house builders. This means the home you are hoping to purchase may not be available through the lender.

Whilst all four lenders have agreed to provide NewBuy mortgages it only applies to new builds in England by the UK’s largest developers, such as CALA, Barratt, Bellway, Bovis, Redrow, Persimmon and Taylor Wimpey.

Choices are limited through this scheme simply because lenders are taking different approaches to how they offer their NewBuy products and where you can buy them from. Some are only selling through specific branches, others through their in-house teams and some only through mortgage brokers.

The rates on offer are higher than those available to people with larger available equity. For example a typical product with the Nationwide would see a Fixed Rate of 5.79 for the first 3 Years or Fixed Rate of 5.79 for the first 5 Years, with a 5 per cent deposit payable.

However they do offer a way forward for people looking to find a step on to the property ladder. I would recommend speaking to an independent mortgage advisor who can help you look at all the options available to you.

Q: Please help me clear up some confusion; is life assurance compulsory with my mortgage?

A: The quick answer is “no”. However, I would strongly advise all aspects of your protection needs are calculated, especially when taking on such a big financial commitment like a mortgage.

Types of cover to consider are redundancy, sickness, critical illness or death, even down to the basics of buildings and contents insurance.

It is inferred by many lenders that life assurance, as a minimum amount of cover, is taken out. The idea being that for a joint mortgage the surviving partner would not be left with the mortgage to repay.

It pays to think about this, especially if the surviving partner wouldn’t be able to afford the payments alone. I would certainly consider your personal situation. Whilst life assurance is not compulsory it can easily be seen as necessary.

There are also changes afoot within the life assurance market. From 21 December 2012 changes to the EU Gender Directive will mean women will pay the same as men for insurance cover.

Insurance companies will no longer be able to calculate insurance premiums based on the current system of women paying less due to higher mortality rates than men.

Franz Muelthaler is a mortgage adviser for Holroyd Miler, Wakefield.