HOUSE hunters could land their new home with a 5% mortgage deposit thanks to a freshly unveiled loan scheme.
The Rezide Equity Loan allows buyers to borrow 95% of the property price on two major housebuilders’ new build homes.
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Climbing the first rung of the property ladder is often the hardest part, and experts say the scheme could help house hunters get off the ground.
But unlike with the government’s scrapped Help to Buy scheme, participants in this new scheme will have to pay 4% interest from day one.
Housebuilders Barratt Redrow and Persimmon have teamed up with TSB and Barclays to launch the initiative.
The scheme essentially allows buyers to secure a property with less upfront cash than they would normally need.
Whereas some lenders require 20% deposits – the Rezide Equity Loan only requires 5%.
The extra 15% will be covered by the Rezide Equity Loan.
And the further 80% of the property’s market value is financed through a mortgage with TSB or Barclays.
An equity loan allows you to borrow based on the value of your home, which then becomes collateral.
The deal is open to both first-time buyers and existing homeowners interested in the two housebuilders’ new build properties across England.
It is initially only available for purchases of Barratt Redrow and Persimmon homes.
Industry experts agree that the scheme could be a helping hand for people struggling to save for a deposit.
But they also warn to be aware of interest rates – which are pricier than the government’s old Help to Buy scheme.
They also recommend you search around for similar offers in case other lenders’ deals suit you better.
David Hollingworth, associate director at L&C Mortgages, said the Rezide loan scheme would “broaden” buyers’ options.
He said: “The 15% equity loan sits alongside a standard mortgage deal and a 5% deposit.
“By providing an equity loan, a smaller standard mortgage is required, amounting to 80% of the property value.
“Mortgage rates will therefore be lower than those available at 95%.”
However, he compared it to the government’s Help to Buy scheme which ran from 2013 to March 2023 in England.
The government-backed initiative was also designed to help first-time buyers get a property with a 5% deposit.
The government lent you between 5% and 20% of the cost of the new build home as an equity loan – up to 40% in London.
David said: “Whereas the Help to Buy equity loan was interest free for the first five years this loan will incur an interest charge of 4%.”
He continued: “Buyers that can afford to buy with a traditional deal are likely to still do so, but the scheme could open up more opportunities to those that may have feared they couldn’t get on the ladder at all.”
David Stirling, an independent financial advisor at Mint Wealth Ltd, agreed that the scheme had “risen from the ashes of Help to Buy”.
He said the scheme “could well provide a helping hand to borrowers” struggling to get a deposit.
Justin Moy, managing director at Chelmsford-based EHF Mortgages, said the scheme was “encouraging but not unique”.
“There are several schemes that assist new buyers with these smaller deposits,” he said.
He added that the fact applicants will be limited to two housebuilders’ properties would be “frustrating for many”.
The government’s Help to Buy scheme helped over 225,000 buyers in the decade it was active.
Experts say it was scrapped because first-time buyers were often paying over the odds for their first home.
New build properties depreciate in the same way that a brand new car does.
There have also been concerns that it inflated house prices, as argued by the International Monetary Fund in 2014.
Help to Buy in Wales, however, is available until September 2026.
What help is there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
Mortgage guarantee scheme – The scheme is available to those with a 5% deposit, with the government providing a guarantee to the lender to cover some losses if the buyer cannot repay their mortgage. It’s eligible for homes up to £600,000.