FIRST time home buyers are being offered a £5million safety net “to make their dreams come true” from South Kesteven District Council.
The authority is launching a new Local Authority Mortgage Scheme, the first in Lincolnshire, which will work by reducing the deposit needed by the lender from 20 per cent to just five per cent with the council guaranteeing the difference.
Detailed negotiations will not begin until the scheme has been formally agreed by councillors, but it is hoped it will be up and running early with the first £1million commitment in the New Year as part of its 2012/13 budget.
Council leader Coun Linda Neal said: “We know that lots of local people can afford monthly mortgage payments but cannot move into the market because they haven’t got the deposit.
“If you take a house with a relatively modest asking price these days, say of £100,000, that means that the potential purchaser needs a deposit of at least £20,000.
“Not too many people starting out in the housing market have that sort of cash and that is where we can help.”
Those using the Local Authority Mortgage Scheme must be buying a home in South Kesteven. They must also qualify for a mortgage offer as normal.
The council says it will only have to use the cash if the borrower fails to make repayments or breaches the terms of the mortgage and the property is sold at a loss. The indemnity remains in place for five years and can be extended for a further two years if the mortgage is in arrears.
It is also anticipated that to make the fund go as far as possible, it is likely that the maximum house price available for support will be £125,000.
Coun Neal added: “I want to make it clear that this scheme does not promote reckless lending or provide unaffordable mortgages.
“What it will do is make dreams come true for first-time buyers who will be able to get a home of their own and so provide a much-needed stimulus to the entire local housing market.”