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Last Updated: Thursday, 27 January 2005, 23:51 GMT
Ask the expert: Key worker mortgages
Duncan Pownall
Mortgage adviser Duncan Pownall

BBC News website's Ask the Expert column gives readers a chance to have their financial questions answered.

This week Bradford & Bingley mortgage adviser Duncan Pownall helps Your Money reader Ms Mansbridge.

Ms Mansbridge wants to know if her son's partner, a teacher, will be able to claim any state help when they buy a home.

Duncan Pownall writes:

The government has made a big deal out of helping key workers, such as teachers, achieve their property-owning dream.

Key workers are defined as nurses, NHS staff, teachers, police, fire fighters, prison officers and social workers.

From the information you have supplied, it is likely that your son's partner will be defined as a key worker.

The government's scheme provides key workers with loans of up to 100,000.

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These loans are meant to cover the deposit on a property.

Key workers that make use of the scheme will still have to obtain a mortgage.

Lender reluctance

Some banks and building societies are put off sanctioning a mortgage when there is a key worker loan involved.

They prefer the borrower to provide their own deposit.

In fact, some lenders insist on borrowers funding 5% of the value of the property from their own savings.

However, many lenders accept key worker loans as if they were the borrower's own cash.

As a guide, the Halifax, Leeds & Holbeck, Abbey, Cheltenham & Gloucester and Royal Bank of Scotland are among those that accept key worker loans as a deposit.

If your son's partner chooses to take out a key worker loan, he or she needs to be aware that the loans come with some strict provisos.

The property must be kept in good repair and be insured.

In addition, the loan is available for the worker's main residence only.

Essentially, the loans are not to be used for the key worker to launch their buy-to-let career.

Repayment

The loan, of course, needs to be repaid at some point.

The first and most obvious circumstance where the loan must be repaid is when the property comes to be sold.

The amount repayable will be in direct proportion to the growth in the value of the house.

For example, if the key worker loan was for 25,000 on a property valued at 100,000 and the property doubled in value to 200,000, the amount owed would also double to 50,000 on sale.

The flip-side of this is if the property were to lose value, the loan would also come down.

The loan also has to be repaid if the key worker accepts a job not covered by the scheme.

However, if the key worker is made redundant or has to leave work due to ill health then the loan would not have to be repaid until the property was sold.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



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