Help to Buy Scheme – Whats it all about?


The Help to Buy Scheme aims to make home ownership a reality for more people across the country.  The Government have agreed to assist people who have at least a 5% deposit to buy a home through two schemes aimed at increasing the supply of low deposit mortgages in new housing.   The schemes can help you to purchase a home up to a value of £600,000.00.  For those who could afford a mortgage but are struggling to get a deposit together, this could be for you.

Help to Buy consists of two which in essence do the following:-

Scheme 1 – Help to Buy: The Equity Loan

This option only applies to new build properties.  You will need a minimum 5% deposit to qualify whether you are a first time purchaser or an existing home owner. The Government will lend you up to 20% of the value of your property through an equity loan which can be repaid at any time  up to the 25 year limit or on the sale of your home, so you only need to secure up to a 75% mortgage from a bank or building society.  This scheme became available from the 1st April 2013.  There are no loan fees for the first five years but thereafter there is a fee commencing at 1.5% of the value and increasing thereafter.

Scheme 2 – Help to Buy: Mortgage Guarantee

This option applies to both new build properties and older homes and again applies not only to first time buyer but also to existing home owners. You will need a 5% deposit.

This is not a loan to you.  It is the Government guaranteeing to the mortgage lender to meet up to 20% of the value of the property if things go wrong and if the lender needs to foreclose.  So the lender is therefore effectively only considering as risk of up to 75% of the value of the property and is therefore more likely to provide a loan to you for a mortgage.  Again, terms and conditions apply which this article cannot cover.

However, as with all things that seem to be going well we are now all subject to the introduction of the new rules known as the “Mortgage Market Review”.  This requires lenders to undertake through checks on income and expenditure in order to minimise the risk of borrowers taking on unaffordable debt and it has been suggested that this can include how much you spend on holidays or for child care costs etc.

For further information about these processes that are available please contact our Conveyancing Department on 0191 284 0363.

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