If you’re dreaming of owning your own home but are struggling to save up a large enough deposit whilst paying both rent and monthly bills, you could well benefit from the ‘Help To Buy‘ scheme. This government initiative was created to help those saving to buy their own home (or in some instances move themselves up the property ladder) do so without having to save for years to hold a sizeable deposit. It means that, in short, it’s now possible to buy a new-build or existing home up to the value of £600,000 with just a 5% deposit.
Given that many have been needing to save at least a 10% deposit when not using the scheme, or in some cases, 20% or more, above all, it makes becoming a homeowner easier to achieve and makes it a reality, not just a dream!
The ‘Help To Buy’ scheme is split into two main options, ‘Equity Loans‘ and ‘Mortgage Guarantee,‘ both of which are the perfect way to realise your dream of either becoming a homeowner or moving up the property ladder, with the most suitable depending entirely upon what it is you’re looking to buy.
Equity Loans
When taking out an equity loan through ‘Help To Buy,’ the government will lend you up to 20% of the value of a new-build home. The key factor here is that equity loans are only available on new-build homes, however given the rate at which they’re being built in the UK, that shouldn’t pose too much a problem for most looking to jump on or up the property ladder.
In addition to the 20% borrowed from the government, you’ll need to put down your own 5% deposit, which means you’ll end up only needing to take out a mortgage with a 75% loan to value. This means you’ll be able to get a better rate than if you were needing a mortgage for 95% of the property price whilst being in a position to keep repayments down. You won’t pay any interest on the 20% borrowed from the government for the first five years.
Equity loans are available both to first time buyers and those already owning their own homes but who are looking to move but are struggling to afford to do so due to the equity required to put down as a deposit on your next home. The home you buy must be a new-build and can only be up to the value of £600,000. Other criteria state that you mustn’t own any other property and that you cannot sublet your new property under the scheme.
Mortgage Guarantee
A mortgage guarantee is, in short, a mortgage supported by the ‘Help To Buy’ scheme. In theory, it’s no different to any other type of mortgage except the fact that lenders are able to purchase a guarantee on loans. Through this scheme, the lenders who take part are in a position to offer home buyers higher loan to value mortgages (up to 95%).
If you take out a mortgage which has a mortgage guarantee from ‘Help To Buy,’ you’ll still be responsible for all repayments. What the scheme does, however, is offer lenders a guarantee on a percentage of the mortgage, making it easier for borrowers to be able to take out the mortgage they need to purchase their ideal home.
To qualify for help under a mortgage guarantee, the property can be either a new-build or existing home up to the value of £600,000. You mustn’t own any other property and the mortgage you take out must be repayment not interest only.
In addition, the deposit cannot come from any government scheme and a mortgage guarantee cannot be used in conjunction with an equity loan and the size of the mortgage cannot be more than 4.5 times your income.
Above all else, ‘Help To Buy’ is there to help both first time buyers and those who are looking to move up the property ladder, either due to an expanding family or the wish for a bigger home.
If you’re considering either buying your first home or are looking to move, either into a new-build or an existing property, why not give us a call on 0800 756 7794 to discuss your options and to let our expert mortgage brokers offer you invaluable advice and find the most suitable mortgage for you.
Here at Search Mortgage Solutions, we offer NO BROKER FEE mortgage advice meaning it won’t cost you a penny, whilst ensuring you receive the very best guidance and, above all else, the right mortgage for you.