Help to Buy – can you make use of it??
Does your dream home have a not so pleasant deposit? Well this is where Help to Buy comes in. Help to Buy is a Government-backed scheme, in which it acts to support buyers who may have problems in raising a considerable amount for a deposit. By using the help to buy scheme this means you could move home with a deposit as low as 5%.
There are 2 ways of making use of the Help to Buy scheme and they do share a variety of the same rules:
- Minimum of a 5% deposit
- The property you buy must be the only property you own and you will need to have the intensions of living there
- Must be under £600,000
Although the two schemes do share handful of the same rules they are, at the same time, very different. The two ways in which you can make use of the scheme are:
- Mortgage guarantee – This is available on all property under £600,000 (under 90% of all property on Rightmove.) As previously stated all you need is a deposit of 5% to be able to apply for a mortgage under this scheme. The way the mortgage guarantee makes use of the scheme is the government assures your lender that it will cover part of any losses they may sustain as a result of the mortgage not being repaid. This is available for new AND old properties.
Mortgage guarantee is only between your lender and the government, which means you will have no extra problems.
- Equity loans– Unlike the mortgage guarantee scheme, the equity loan scheme is only available on newly built homes. The property itself will need to be under £600,00 and you will need at least 5% of the sale price of your new-build home for the deposit. In order to top up your deposit the government will provide you with a 20% Equity Loan, which results in only needing to apply for a 75% Mortgage.
This loan is separate from your mortgage and is between you and the government. You will not be charged interest for the first 5 years of this loan, but interest will be due in year 6 to repay each month at 1.75% of the loan then from year 7 and onwards you will be charged 1.75% + RPI (retail prices index.)
Which scheme is right for you? For advice on the best pathway for your situation, talk to one of our staff at Gordon Barker and they’d only be too happy to help.