Help To Buy
There are two Government backed Help to Buy mortgage schemes currently available to qualifying applicants in the UK. These are the Help to Buy Mortgage Guarantee scheme and the Help to Buy Equity Loan scheme. Both were introduced by the government to help people with a limited deposit to purchase their own home.
We have produced below, a very simple guide on how these two schemes work. If you would like to know more or find out if you could qualify for either of these two forms of government assistance then we’ll be pleased to help.
Help to Buy Mortgage Guarantee Scheme
As the name suggests with the Help to Buy Mortgage Guarantee scheme, the Government provides your lender with the option to purchase a guarantee on your mortgage loan. This guarantee means that the lender can offer you a mortgage of up to 95% of the purchase price of your new home, leaving you, the buyer to make up the difference with a 5% deposit. From day 1, you will own 100% of the property meaning if you choose to sell in the future, any equity that has been accrued is yours. This scheme can be used for both new build and pre lived in properties.
Help to Buy Equity Loan
This is a slightly different alternative where the Government will lend you up to 20% of the cost of your new build home (Note – this scheme only applies to newly built homes). In this instance, you again only need a 5% deposit with a 75% mortgage covering the rest of the purchase price.
For example, on a new build home originally costing £200,000, the government would offer up to £40,000 towards your deposit, your lender would provide a mortgage of £150,000 and you would make up the difference with a £10,000 deposit.
Under this scheme you won’t be charged any interest or fees on 20% Government loan for the first 5 years. After this you have the choice to buy the 20% loan back from the government (at current value) or start paying a pre calculated interest charge. The 20% government loan however, must be repaid within 25 years.
