NewBuy scheme explained
- How the NewBuy scheme works
- Who qualifies for the NewBuy scheme
- Which lenders are participating in the NewBuy scheme
- What the government's 'guarantee' means
What is the NewBuy scheme and how does it work?
The NewBuy scheme was launched by the government in March 2012 to help people get on to or climb up the housing ladder by buying a newly built home.
Housing developers and the government are underwriting mortgages with a number of lenders to allow them to provide mortgages to people with a deposit as small as 5% of the value of the property they want to buy.
Builders are contributing 3.5% of the purchase price of a property and the government is providing 5.5%. This should reduce the risk of lending to people with small deposits.
Who qualifies for the NewBuy Scheme?
You don't have to be a first time buyer to participate in the NewBuy scheme, but you have use the home you buy as your main residence. This means that you cannot buy a home under the NewBuy scheme on a buy-to-let basis. You cannot buy a property valued above £500,000 under the scheme.
You need a deposit of at least 5% of the property price, and much like any other mortgage borrowing criteria, a good, clean credit history.
Which mortgage lenders are involved in the NewBuy Scheme?
Each housing developer (or builder) works with chosen mortgage lenders, so if you want to buy a NewBuy house then you will need to apply for a NewBuy mortgage using the builder's chosen lender(s).
The mortgage lenders who participate in the NewBuy Scheme are:
Does the NewBuy Scheme protect me if I can't afford to make repayments?
The government's guarantee is aimed at lenders, to stimulate them to offer mortgages to people with small deposits. There is no guarantee for buyers if they get into difficulty making repayments - you will be treated like any other borrower.
If your property is repossessed, you are responsible for any shortfall between the value of the property when it's sold and the size of your mortgage loan.
Need mortgage advice?
We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.