Mortgage Simplicity Ltd is an appointed representative of Julian Harris Mortgages Limited, Julian Harris House, Musgrove, Ashford, Kent, TN23 7UN, which is authorised and regulated by the Financial Conduct Authority.
Cooperage Way Business Village Cooperage Way Alloa
FK10 3LP
United Kingdom
Help to Buy Mortgages, Free Mortgage Advice
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Help To Buy Mortgages

·           Help to Buy

Help to Buy is a government-backed initiative aimed at helping people buy a home. It will help both first time buyers and existing home owners 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 up to 20% of the purchase price plus a traditional mortgage.

Help to Buy Mortgage Guarantee

1        How the scheme works

The Help to Buy mortgage scheme aims to improve the availability and cost of mortgages requiring smaller deposits. It is available across the UK and can help you buy a home with a deposit of as little as 5%.

The guarantee element is provided to your lender – not you. You apply for a mortgage from a participating lender as normal and you’ll be subject to their usual lending criteria.

The scheme works behind the scenes by offering lenders the option to purchase a guarantee from the government on mortgages where a borrower has a deposit of between 5% and 20%. The guarantee offers lenders an ‘indemnity’ or insurance cover, which will compensate them for most of any loss they may suffer if the property has to be repossessed and there is insufficient equity in the property to fully repay the lender.

You don’t have to be a first-time buyer and pre-owned homes are eligible as well as new-build properties.

2        Example

If the home in the graphic above sold for £250,000, making a £50,000 ‘profit’, you’d get the entire £250,000, without having to pay back any government loan or share any profit. As you own the property fully, you receive the full benefit of any property appreciation with just your mortgage to repay as with any normal mortgage.

3        Who is eligible for Help to Buy mortgage guarantee?

Eligibility criteria for the scheme are detailed below:

  • Available to both existing home owners and first-time buyers
  • Buyers need a minimum of 5% deposit
  • Available on previously owned and new build properties up to the value of £600,000
  • Must be the only property owned by the borrower
  • Available for properties in the UK
  • Borrowing from a participating mortgage lender
  • Buying a residential property that will be lived in and not rented out

4        How long will the scheme be available?

The Help to Buy mortgage guarantee was launched in October 2013, ahead of the 1st January 2014 date originally planned. The scheme is set to run until January 2017 although the Bank of England will monitor its impact and could either make changes to the qualifying criteria or how long it will be available if they think it is necessary to do so.

Help to Buy Equity Loan English Scheme

5        How the scheme works

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 standard 75% mortgage to make up the rest.

To apply for an equity loan, you’ll need to contact the Help to Buy agent in the area you want to live – they will then assess whether you qualify.

The equity loan is interest free for the first 5 years, but in the 6th year there will be a charge of 1.75% of the loan’s value. After that, the charge will rise on an annual basis by the retail price index (RPI) plus 1%.  In Scotland the Help To Buy Loan is Interest Free for as long as you live in the home.  You only pay back 20% when you come to sell the house, there is no time limit on when you have to sell and theoretically you could live in the home for 100 years and not pay any interest on the loan during this time

The home will be in your name, which means you can sell it at any time. However, you’ll have to pay back the equity loan when you sell your home or at the end of your mortgage period – whichever comes first. This will include a share of any growth in the value of the property (see example below).

6        Example

For a property worth £200,000 Amount Percentage
Cash deposit £10,000 5%
Equity loan £40,000 20%
Your mortgage £150,000 75%

If the home in the table above sold for £210,000, you’d get £168,000 (80%, from your mortgage and the cash deposit) and pay back £42,000 on the loan (20%). You’d need to pay off your mortgage with your share of the money.

7        Who is eligible for Help to Buy equity loan?

Eligibility criteria for the scheme are detailed below:

  • Existing home owners and first time buyers
  • Buyer has a maximum deposit of 5% of the purchase price
  • Borrowing from a participating lender
  • Available in England on new build properties up to £600,000 and from participating house builder (alternative schemes are available in Wales and Scotland)
  • Buying a residential property that will be lived in and not rented out
  • Must be the only property owned by the borrower
  • Can meet the affordability criteria for the mortgage and equity loan

8        How long will the scheme be available?

The scheme is scheduled to run from 1 April 2013 until 31 March 2016, although will be terminated sooner if the available funding earmarked by the government is used up.

9        Free Mortgage advice

If you’re interested in buying a new home using one of these schemes and need advice on the right mortgage deal, speak to one of our advisers on 0845 838 1502 or request a call back above.

10   Useful links

More information on these schemes can be found at www.helptobuy.org.uk and www.gov.uk.

We do not charge a fee for arranging your mortgage and have access to Help To Buy, Buy To Let, Shared Equity and other Specialist Mortgages.

 

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Need help? Give us a call or request help by sending us a message through our contact page.

Simply click on the Contact us tab to the right.

Important

Mortgage Simplicity Ltd is an appointed representative of Julian Harris Mortgages Limited, Julian Harris House, Musgrove, Ashford, Kent, TN23 7UN, which is authorised and regulated by the Financial Conduct Authority.

Julian Harris Mortgages Limited FCA Register number is 304155.

UK Financial Services

The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

Contact Us

Mortgage Simplicity Ltd
The E-Centre
Cooperage Way Business Village
Cooperage Way
Alloa
FK10 3LP

Tel: 0845 838 1502 / 03330 113157
Email:info@mortgagesimplicity.co.uk