Help to buy mortgages: an easier step onto the property ladder
Help to Buy is a government initiative aimed to help first-time buyers purchase their own home. It requires the buyer to put down as little as 5% of the purchase price with the government then adding incentives to the buyer and mortgage lender.
Help to Buy Mortgages
There are two options you can choose from with Help to Buy: Mortgage Guarantee and Equity Share. Both allow first-time buyers to purchase properties up to a value of £600,000 with as little as a 5% deposit.
Mortgage guarantee – Available on new build and older homes, the buyer puts down a 5% deposit which allows homebuyers to get a special Help to Buy mortgage for the other 95% of the property price. In effect, the government is your guarantor, saying to your lender that if you default, the government will pay a certain amount to the lender as compensation. It allows you to get a more affordable mortgage as well as the deposit for a new house.
Equity share – Available only on new build homes, after the buyer puts down a 5% deposit, the government gives an extra 20% loan as a deposit. This loan is interest-free for five years after which it’s payable at 1.75% of the loans value.
Often interest rates are higher than they would be with a standard 95% mortgage, so make sure you are comparing lots of different products to ensure you are getting the best deal for you.
Remember too that the Help to Buy scheme is designed for certain types of purchases only. You can’t use it to buy a second home if you own one already, or for a buy to let purchase. It is also not available on Shared Ownership purchases.