Help to Buy
The Help to Buy scheme is made up of two parts:
- an 'equity loan', (from 1 April 2013) where the Government will lend you up to 20% of the value of your newly-built home
- a 'mortgage
guarantee', where the Government will guarantee part of your
mortgage if you only have a small deposit
The equity loan scheme - for newly built property
This scheme started on 1 April 2013 and will run for three years. It will be available in England only. The Welsh and Scottish Governments and the Northern Ireland Assembly will have funding for similar schemes.
Under the loan scheme, if you have at least a 5% deposit and want to buy a newly-built home, you can apply for a loan worth up to 20% of the value of the property. So you will only need to take out a mortgage for 75% of the cost of the property.
The loan is
funded by the Government and will be interest-free for the first
five years. After that, you will pay a fee of 1.75%, which rises in
line with inflation. You can repay some of the equity loan without
selling your home. You will have pay back the equity loan
when you sell the property or when the mortgage period comes to an
end - whichever comes first.
Help to
Buy replaces a previous scheme - FirstBuy
Help to Buy loans are available to movers as well as first-time buyers
- you don't have to be on a low income to qualify
- loans are available on properties worth up to £600,000
You can apply for the scheme via participating house builders or through a 'Home Buy agent'.
The
mortgage guarantee scheme - for newly built and
existing property.
It will be available throughout the UK.
The mortgage
guarantee part of the Help to Buy scheme is designed to help you
get a mortgage, if you only have a small deposit.
One of the
problems experienced by people looking for a mortgage is that most
mortgages - and the lowest interest rates - are only available to
those people who need to borrow 75% or less of the value of their
property. If you're looking to borrow 90% or 95% there are only a
very few expensive deals around.
However, under
the scheme, if you have a deposit of between 5% and 20%, mortgage
lenders will be
able to buy a
guarantee from the Government that will compensate them if you
default on your mortgage. So, in other words, with some of the risk
removed, your mortgage company should be able to lend you the money
to cover 90-95% of the purchase price of a property.
Some key advantages of the scheme:
- the mortgage
guarantee is available to movers as well as first-time
buyers - it's available on both newly built and existing properties
- you can get it on properties worth up to £600,000
Some key areas to be aware of under the scheme:
- only repayment mortgages will be available
- it won't be available to people with a history of difficulties making debt repayments
- there will be tough checks to make sure buyers can afford their mortgage payments
NewBuy
The NewBuy scheme is designed to help you buy a newly-built home by offering a mortgage of up to 95% of the property's value.
It's aimed at first-time buyers and those who already own a home but who only have a small deposit saved. It's only available in England.
You can get it on properties priced £500,000 or less.
The property being purchased must be built by a builder taking part in the scheme.