Help to Buy

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Help to Buy is a government scheme designed to make getting on to or moving up the housing ladder more accessible. It helps existing home owners and first time buyers purchase a home with as little as 5% deposit.

There are two ways to purchase a property up to the value of £600,000 using Help to Buy:

  • Mortgage Guarantee – available on both pre-owned and new build properties with a standard mortgage of up to 95% of the purchase price.
  • Equity Loan – available on new-build properties only, using a government equity loan of 20% of the purchase price plus a traditional mortgage.

Mortgage Guarantee – Help to Buy

From October 2013, Help to Buy has been extended to make it possible to purchase any property under £600,000 – be it a new build or pre-owned home – with as little as a 5% deposit.

How does the Mortgage Guarantee scheme work?

The process of applying and repaying the mortgage is the same as it would be for a standard mortgage. The scheme is intended to increase the availability of mortgages at competitive interest rates for buyers with a minimum of 5% deposit. The government are making this possible by guaranteeing repayment of the mortgage to the lender and this will be dealt with behind the scenes by participating lenders. There will be no additional paperwork or charges for the buyer.

  • Who is eligible for the scheme?Available to both existing home owners and first-time buyers
  • Buyers need a minimum of a 5% deposit
  • Available on all previously owned and new build properties up to the value of £600,000
  • Must be your only property
  • Available for properties in the UK
  • Borrowing from a participating mortgage lender

Natwest/RBS and Halifax already have deals available. HSBC have announced that they will participate in the scheme and are expected to be offering deals from November 2013. Other lenders are expected to join in later in the year and the effect of this could be to reduce rates.

Equity Loan – Help to Buy

With a Help to Buy Equity Loan, the government loans you up to 20% of the cost of a new-build home, so you only need a 5% deposit and a 75% mortgage to make up the rest. The Equity Loan scheme is only available from approved, participating house builders.

How does the Equity Loan scheme work?

The home will be in your name, which means you can sell it at any time. However, as this is an equity loan, you’ll have to pay back the loan amount when you sell your home, or at the end of your mortgage period, whichever comes first. The amount to be paid back is 20% of the sale price, which may be more than the original loan amount depending on whether your home has increased in value whilst you have owned it.

  • Available on new build properties only up to the value of £600,000
  • Equity loan scheme, using a government equity loan of 20%, which will need to be repaid on sale of the property
  • Must be your only property
  • Buyers need a minimum of 5% deposit
  • Available to both first-time buyers and existing home owners

You won’t be charged loan fees on the 20% equity loan for the first 5 years of owning your home. In the 6th year you will be charged a fee of 1.75% of the loan’s value, which will increase every year by the retail price index plus 1%.

If you are interested in buying through the Help to Buy scheme please contact one of our team in the property department on 020 8215 1000. To find out more and get an idea of the costs involved speak to Gary Gillespie (ggillespie@wiseman.co.uk), Janice Maskell (jmaskell@wiseman.co.uk), Ros Grant (rgrant@wiseman.co.uk) or Debra Rose (drose@wiseman.co.uk)  

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