help to buy… is it for me?

This scheme is available in England only. The Scottish Government, Welsh Government and Northern Ireland Housing Executive run similar schemes.

If you have any questions regarding help to buy or wish to apply for a help to buy mortgage please feel free to give us a call on 01342 826 741 or drop us an email advice@fordyceplayle.co.uk

In April 2013, the UK government set up a scheme to help first time buyers get on the property ladder and to help kick start the building industry, by offering equity loans to people buying new build homes. Since then the scheme has evolved into something that is more accessible to more people.

We have asked our mortgage team to put together a handy blog post to help explain the differences in the current schemes and how these can help you get on, or move up, the property ladder.

Help to Buy: Mortgage Guarantee
For new-build or existing homes anywhere in the UK.

The easiest way to get your head around the help to buy mortgage guarantee scheme is to pretend that the government aren’t involved. Essentially this scheme allows you to buy any home up to the value of £600,000 with just a 5% deposit.

Everything in mortgage lending comes down to the risk involved, lenders want to be a) confident that you can repay the mortgage and b) able to get their money back by way of repossession if you cannot repay—that is, by selling your home to make the payments. With small deposits such as 5% the risk is much higher to mortgage lenders as if you did stop repaying your mortgage, the chances of them getting all their money back is lower, because the value of the property is only slightly more than the mortgage. The government functions almost as an insurer: they are giving mortgage lenders the confidence to lend with a small deposit, for, if the worst was to happen, the government would cover a portion of the mortgage by paying out on an insurance policy that the lender takes out.

This type of insurance has been around for a long time by private insurance companies. Since the recession, however, the appetite to insure in this way has been dramatically reduced, due to higher levels of repossessions and falling house prices. The hope is that now the property market is recovering these private insurers will come back into the market and remove the need for the government to step in.

Are you 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 must not 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 size of the mortgage you apply for must be less than 4.5 times your income.

The Help to Buy: mortgage guarantee scheme will run for three years until 31 December 2016.

Example from the help to buy website:

Help to Buy: Equity Loan
For brand new homes in England.

The equity loan scheme is considered a bit trickier to understand. But in simple terms it helps first time buyers and home movers buy a new-build home with a 5% cash deposit, a 20% loan from the government and a 75% mortgage. But the loan from the government is not like a traditional loan where you have to make monthly repayments, for the first 5 years this loan is fees free. The government will own 20% of your house so when you come to sell they will take 20% of the sale price.

Example for the help to buy website:

This scheme is available in England only. The Scottish Government, Welsh Government and Northern Ireland Housing Executive run similar schemes.

If you are interested in knowing more or would like independent mortgage advice in Eastbourne, feel free to call one of our Brokers on 01323 409 849 or email office@sentryadvice.co.uk