Help to Buy

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The video below explains how the help to buy scheme works and who it is applicable. Have a click and see what you can learn from it in 3minutes!

Since the recession hit the UK the government has been proactive in ensuring everyone has a fair chance in home ownership. Consequentially the help to buy scheme has opened avenues for first time buyers and homeowners alike. The help to buy scheme is accessible to hard working people like you who may be considering your first house purchase or even upgrading to a bigger property and they are backed by the government. There are two options available under these schemes such as;

  • Help to buy Equity Loan
  • Help to buy Mortgage Guarantee

Help to Buy Equity Loan

Setting aside a big deposit for a new home can be a challenge. But the government-backed Help to Buy scheme allows people with smaller deposits to qualify for loans on new-build homes worth up to £600,000. You can put down a minimum 5% deposit, and then secure an equity loan from the Homes and Communities Agency of up to 20% of the property’s value. The diagram below gives a brief overview on how it works;

How does it work?

The Government lends you up to 20% of the cost of your new-build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home.

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) please go to www.helptobuy.org.uk

Help-to-Buy

Help to Buy Mortgage Guarantee

The Help to Buy: mortgage guarantee scheme was created by the government to help credit–worthy people overcome larger deposit requirements and become homeowners. Under the scheme, the government offers mortgage lenders the ability to purchase a guarantee on mortgages where a borrower has a smaller deposit. Because of this support, mortgages are available on existing and new–build properties to customers who have a deposit of between 5% and 10%. The Help to Buy Mortgage Guarantee helps you buy any home up to £600,000 with a minimum deposit of 5%.

How does it work?

A mortgage supported by the Help to Buy: mortgage guarantee scheme works in exactly the same way as any other mortgage except that under the scheme the Government offers lenders the option to purchase a guarantee on mortgage loans. Because of 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

Who is eligible?

A mortgage under the Help to Buy: mortgage guarantee scheme works like any other mortgage. Your 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 mustn’t 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 Help to Buy: mortgage guarantee scheme will run for three years until 31 December 2016