Save Money on Your Mortgage with Help to Buy
A: Help to Buy is a Government-backed initiative designed to support buyers with small deposits to take their first or next step on the property ladder by making affordable mortgages more readily available.
Q: “How does it work?”
A: Help to Buy is split into two options – a Mortgage Guarantee and an Equity Loan.
The Help to Buy Mortgage Guarantee benefits buyers with a deposit of between 5% and 20% looking to purchase a new or existing home.
The Government will cover your mortgage lender on a percentage of the loan amount, lowering interest rates by reducing the element of risk encountered by the lender.
The scheme is available from participating mortgage lenders only.
Available on new-build properties built by participating developers, Help to Buy’s Equity Loan gives buyers with a 5% deposit the opportunity to benefit from lower loan-to-value mortgage rates.
As a general rule, the higher the percentage of the purchase price you require from your lender, the higher the rates of interest offered will be.
The scheme will loan the borrower 20% of the purchase price, meaning that once combined with the 5% deposit, they are able to take advantage of 75% loan-to-value mortgage rates.
You will not be charged on the equity loan for the first five years you are living in the property. In the sixth year, you will be charged a fee of 1.75% of the loan’s value, increasing each year by the Retail Price Index plus 1%.
Q: “What happens if I sell before the loan is paid off?”
A: You will have to pay back the equity loan when you sell your home or at the end of your mortgage period – whichever comes first.
Q: “Who is Eligible?”
A: In order to qualify to take advantage of Help to Buy, you must be able to meet the following criteria, in addition to standard mortgage checks:
- The mortgage must be a residential mortgage not a buy-to-let mortgage, so you will be planning to live in your house and not rent it out;
- The property you want to buy must be in the UK and the purchase value must be £600,000 or less;
- The mortgage must be taken out on a repayment basis, rather than interest-only;
- Your mortgage will be subject to your lenders’ normal checks and criteria, as well as specific scheme requirements to ensure responsible lending. You should not be credit impaired to benefit from the mortgages supported by the scheme;
- The mortgage must be to buy your only property, so you cannot have an interest in any property, anywhere in the world. Your lender will ask you to declare that you have no interest in any other property, or will have no interest in any other property once the mortgage completes, as part of the application process;
- You can use the scheme for remortgaging;
- You do not have to pay any additional fee to the Government to get a Help to Buy supported mortgage;
- Offset and Guarantor mortgages are excluded from the scheme;
- The mortgage could be taken out by an individual or individuals but not by a company;
- The scheme cannot be used in conjunction with any other Government scheme such as Shared Equity or Shared Ownership. The deposit for the property can also not come from Publically-Assisted loans.
Q: “How do I apply?”
A: To find a participating lender with the deal that is right for you, book a FREE mortgage consultation with our expert Financial Advisors by completing the online form, or by calling 0161 443 4555.
“Your home may be repossessed if you do not keep up repayments on your mortgage.”