Help to Buy mortgages incorporated four separate schemes when they were announced in the 2013 budget, intended by the government to help first time buyers and home movers afford to buy new homes in the current economic climate and housing market. The four initiatives that made up Help to Buy were equity loans, shared ownership, NewBuy and the mortgage guarantee.
Equity loans are only available in England, and are open to people buying new-build properties. If you have a 5% deposit available, the government will top up your deposit with an equity loan of up to 20% of the property value. No interest is charged on the loan for the first five years, after which a percentage fee is charged each year. You can either repay the loan in stages (in minimum 10% increments) at any time, or pay it off when the you sell the property.
Shared ownership schemes have existed in various forms for years, and under the current Help to Buy scheme are available to most first time buyers with a household income under £60,000. Shared ownership allows you to take out a mortgage for a percentage of the property (between 25% and 75%) and pay rent to the housing association for the remaining portion of the property, which they own. Alternative schemes are available for people over 55 or who have long-term disabilities.
NewBuy & Help to Buy Mortgage Guarantee
NewBuy, although now ended sought to provide 5% deposit mortgages from approved lenders available to home movers and first time buyers. This was intended for those looking to purchase newly built or developed properties priced under £500,000 from specific UK house builders.
The mortgage guarantee scheme, also now ended was also designed to make 5% deposit mortgages more widely available to home buyers. In this case the “guarantee” was between the government and the lenders, reducing the lender’s exposure to risk and permitting higher lending limits. Both new-build and older properties valued under £600,000 were eligible.
Even though NewBuy and the Mortgage Guarantee schemes have now ended, this does not mean that those looking for a 5% mortgage (a LTV of 95%) are out of options. There are many lenders who may be able to provide high LTV mortgages enabling first time buyers and those with a lower deposit to get on the housing ladder.
Finding the Best Deal to Get You on the Housing Ladder
The various Help to Buy schemes have and will continue to represent a step forward in promoting affordable home. However, to ensure you find the scheme or mortgage which presents the best option for you, speak to one of our expert mortgage brokers today.
At Just Mortgage Brokers we can provide expert, impartial advice on home mover, first time buyer mortgages and remortgages.