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Help to Buy

By on October 11, 2013
Help to buy

The government’s recent announcement to launch the Second Phase of the ‘Help to Buy’ scheme means that for first time buyers, and existing home owners it is even more accessible to get on, or move up the property ladder. Some of you may be wondering what the scheme is, or missed the information about the first phase in April. Needaproperty want to keep you in the loop with all that is going on in the property market, more importantly, we want to give you valuable information to ‘help’ you buy your dream home!  

A bit of background knowledge 

The government’s Help to Buy scheme launched its first phase in April 2013, to assist first-time buyers of newly built homes in England. Buyers under this scheme benefited from a 20% equity loan from the government, on top of their individually sourced 5% deposit. Similar government initiatives were running in Scotland and Wales simultaneously.   

So, What Is Phase Two About? 

A large increase in the number of houses for sale, makes this new phase a great extension of the initial help to but launch. This is primarily because it is not exclusive to first-time buyers or newly built homes. There are now two ways to purchase a property under the second phase; both only requiring a small deposit of 5% for properties up to £600,000. The two ways are:

  • Help to buy: Equity Loan  

With a Help to Buy equity loan, the government lends you up to 20% of the cost of a new-build home, therefore, with your 5% deposit, you will only need a 75% mortgage to cover the outstanding amount. Equity loans are available to both existing homeowners that are moving and first time buyers on new-build properties worth up to £600,000.  

  • Help to buy: Mortgage Guarantee 

The Help to Buy mortgage guarantee can help you buy a new home or a second hand/existing property with a deposit between 5% and 20%. The key feature of this scheme is that the government offers a seven-year guarantee on 15% of the loan to the mortgage lender – for a fee. This puts mortgage lenders at ease when providing high loans to those that are unable to put down large deposits.         

 Am I Eligible and which Help to Buy Scheme is the best for me? 

Help to buy: Equity Loan 

Help to Buy: Mortgage Guarantee 

  • UK Properties Only 

  • UK Properties Only 

  • Property Purchase Value – up to £600,000 

  • Property Purchase Value up to £600,000 

  • New Build Properties  

  • New Build Properties and ‘Second hand’/Existing Properties 

  • Need a minimum deposit of 5% from buyer 

  • Need a deposit between 5% and 20% deposit from buyer 

  • Government gives you an equity loan – 20% of the property’s value excluding loan fees for the first five years.  

  • Government gives the mortgage lender a seven year 15% guarantee on the loan for seven years for a fee charged to the lender.  

  • You can take up to the duration of your mortgage to pay the equity loan. In the 6th year, you’ll be charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year. Please see the home to buy website for figures. Your assigned Help to Buy agent will contact you before the interest fees start, to set up monthly payments with your bank. In addition, you will receive an annual statement of your loan. 

  • The mortgage guarantee scheme offers a guarantee to your mortgage provider and not to you. You are responsible for paying your mortgage under this scheme and will be assessed accordingly via credit checks. The mortgage must be taken out on a repayment basis, rather than interest only. 

 

 

 

  • Your mortgage must be to purchase your only property; therefore, you cannot use it to buy a second home. 

  • Your mortgage must be to purchase your only property; therefore, you cannot use it to buy a second home. 

  • The property in question must be where you plan to reside. You cannot rent or sub-let. 

  • The property in question must be where you plan to reside. You cannot rent or sub-let. 

How does the Help to Buy Equity Loan benefit me? 

How does the Help to Buy Mortgage Guarantee benefit me? 

If you are able to source 5% of the property’s value but desire a lower cost mortgage of 75% or less. This equity loan scheme is for you. The five-year interest free government loan gives you some time to regain financial stability when preparing to pay off your mortgage. 

If you can afford to repay a mortgage but do not have a large deposit readily available, the mortgage guarantee scheme will benefit you by giving you access to low deposit mortgages. This means you don’t have delay buying or moving into your new home because of not having a large deposit 

 

In the past week, specific banks have revealed whether or not they will be offering mortgages in line with the government’s help to buy scheme. The following banks have announced their support: 

  • Royal Bank of Scotland
  • Natwest 
  • HSBC 
  • Lloyds Banking Group
  • Halifax
  • Virgin Money
  • Aldermore
  • Santander
  • Post Office 

We are sure that this list will increase as more banks deliberate on the accolades of this scheme. It is crucial for you to know how to get a mortgage during these evolving times in the housing industry. The options have been laid out and the choice is yours. 

The property market are excited that these options are available to you. For us, it means that needaproperty can get you closer to finding the right property.

Visit our website today to see the new homes and existing properties that are in your desired area, ready for you to buy under these fantastic schemes!  

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