Help to Buy

The Help to Buy is a government-backed scheme available to both first time buyers and those already on the property ladder who cannot afford a large deposit.

The scheme enables these buyers to purchase a home for as little as a 5% deposit.

There are two ways to purchase your property with Help to Buy; either with an ‘Equity Loan’ or ‘Mortgage Guarantee’.

 

What is the Equity Loan?

With the Equity Loan the Government lends you up to 20% of the value of your new build home. You will not be charged loan fees on this 20% loan for the first five years of you owning the property. With your 5% cash deposit, it means you will only need to secure a 75% mortgage from a bank or building society.

 

Example: for a home with a £200,000 price tag

 

If the home in the example above sold for £210,000, you’d get £168,000 (80%, from your mortgage and the cash deposit) and you’d pay back £42,000 on the loan (20%). You’d need to pay off your mortgage with your share of the money.

For more information (including advice on fees and paying back your loan) you can download a Help to Buy guide here.

Am I Eligible?

The Equity Loan is available to both first time buyers and homeowners looking to move. The property being purchase must be a new build up to the value of £600,000. You are not able to sublet the property or enter a part exchange deal on your old home. You must now own any other property at the time you buy your new home with a Help to Buy equity loan.

To find out more, visit the official Help to Buy Website.

 

What is Mortgage Guarantee?

The Mortgage Guarantee scheme works in exactly the same way as any other mortgage except that under the scheme the government offers the lenders the option to purchase a guarantee on the mortgage loans. Due to this support, lenders taking part are able to offer home buyers more high-loan-to-value mortgages (80-95%).

You will still be fully responsible for your mortgage repayments. So if you have a 5% deposit, you will need to take out and pay back a 95% mortgage.

 

Example: for a home with a £200,000 price tag

 

Am I Eligible?

A mortgage under the Help to Buy: mortgage guarantee scheme works like any other mortgage. The lender will check that you can afford the mortgage and that you do not have a history of payment difficulties.

To qualify for a mortgage supported by Help to Buy mortgage guarantee:

  • The property you are purchasing could be an existing or new-build home in the UK, priced up to £600,000
  • You must not own any other property anywhere in the world at the time you buy your home supported by the Help to Buy: mortgage guarantee scheme
  • Your mortgage must be a repayment one, not interest only. Offset and guarantor mortgages are also excluded from the scheme
  • You can’t let out the property to somebody else
  • Your mortgage can be taken out by an individual or individuals but not by a company
  • You cannot use the mortgage guarantee scheme with any other government scheme such as help to buy: equity loan or shared ownership. Your deposit for the property can’t come from a government scheme either
  • You don’t have to pay any additional fee to government to get a help to buy supported mortgage
  • The size of the mortgage you apply for must be less than 4.5 times your income.

See more at: http://www.helptobuy.org.uk/