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What is Help to Buy?

Help to Buy is a two-part government scheme aimed at helping new or existing homeowners to climb the housing ladder.

The government hopes its Help to Buy scheme will assist either first-time buyers as well as homeowners to climb the housing ladder. It specifically targets those who can afford mortgage repayments but are struggling to raise a deposit.  

The Help to Buy scheme has been rolled out in two stages.  The first part of the scheme has been available since April 2013 and offered equity loans.  The second part has recently been launched and offers mortgage guarantees, 

Both parts offer help with buying a house for prospective homeowners who have a deposit of at least 5 per cent.  Both parts are available for homes worth up to £600,000, but there are crucial differences between the two parts:

What was the first part of Help to Buy?

The first part of the Help to Buy scheme offers equity loans. This means buyers can apply for a government equity loan of up to 20 per cent to complement their deposit, with a mortgage required for the remainder.  The conditions are:

  • You’ll need to contribute at least 5 per cent of the property price as a deposit
  • The government will give you a loan for up to 20 per cent of the property value
  • You’ll need a mortgage to cover the rest
  • They are available on homes worth up to £600,000
  • You must live in the UK
  • They are only available on new builds

What is the second part of Help to Buy?

The second stage of Help to Buy is offering mortgage guarantees.You’ll still need to find a mortgage, but the government will guarantee up to 15 per cent of your mortgage in return for a fee from the lender.  This means lenders are more willing to give mortgages to people with small deposits as the government will guarantee to pay back the lender 15 per cent if you defer on your payments. The government hopes that it will create much more choice for borrowers.

  • You’ll need to contribute at least 5 per cent of the property price as a deposit
  • The government will guarantee up to 15 per cent of your mortgage
  • You’ll still need a normal mortgage of up to 95 per cent of the purchase price
  • The guarantee is available on a home worth up to £600,000
  • The mortgage guarantees are available for old and new build properties
  • It needn’t be the first home you’ve ever bought, but it should be your main home that you live in most of the time – meaning you can’t use the scheme to help fund a buy-to-let property.

When is this second part available?

The actual deals should be available now, but the lenders who have signed up to the scheme have yet to release actual dates.  The actual guarantee will only be valid from 1 January 2014.

How do I find out more?

You may find it useful to speak to a mortgage adviser.  They’ll be able to give you more information to help you decide which solution is right for you and your situatio

 

 


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