How does Help to Buy work?
This is how it works. If you have a 5% deposit and want to buy a new build home, you’ll be able to access the Help to Buy equity loan scheme from April 1 this year. If you want to buy a property which is either new build or an existing property, the Help to Buy mortgage guarantee will be available from January next year.
Buyers will need a minimum 5% deposit for both schemes and will need to meet various tests to ensure they can pay back the mortgage (as well passing their chosen lender’s credit and affordability checks). Once these are met, you’ll be able to use either Help to Buy scheme to buy a property with a value up to £600,000. Existing homeowners can also use the scheme
Help to Buy is only available on capital repayment mortgages and only available on properties which are occupied by the people taking out the mortgage.
For the Help to Buy equity loan scheme, the Government will provide buyers with an equity loan of up to 20% of the value of a new build property. The loan is interest free for the first five years and from year six a fee of 1.75% is payable on the equity loan, which rises annually by RPI inflation plus 1%. The equity loan can be repaid at any time within 25 years (or the terms of the mortgage), or on sale of the property.
There is also the Help to Buy mortgage guarantee – the Government will make available £12bn of guarantees to lenders which will be sufficient to support £130 billion of high loan to value mortgages. The purpose of the scheme is to increase the availability of mortgages for buyers with small deposits. The plan is to incentivise lenders to offer a greater number of mortgages to buyers with small deposits. Mortgage guarantee will be available on all residential properties in the UK up to a value of £600,000.buying house, mortgage
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