Help to Buy mortgages – an easier way to get on the property ladder.
With the government’s Help to Buy initiative, new-home buyers only need to get together 5% of the purchase price of a new-build property and the government will give additional help to make that all-important first step onto the property ladder a reality.
Help to Buy has two options – Equity Share and Help to Buy: Mortgage Guarantee. Each option gives first-time buyers the ability to buy a new home that has a purchase price of £600,000 or less while only putting down a deposit of 5%.
Equity Share is only available for buyers of new properties. After putting down a deposit of 5% for a new build property, you will be loaned an additional 20% of the new home’s value by the government. This is an interest-free loan for five years, after which it’s repayable at 1.75% of the full loan amount.
With Help to Buy: Mortgage Guarantee, you can buy older properties as well as new. After putting down 5% of the purchase price as a deposit, you can apply for a Help to Buy mortgage for the other 95% of the property price. With this Help to Buy mortgage the government is in effect acting as a guarantor, so the mortgage lender knows that, if you default, it can claim the money back from the government. It means you can access a much better mortgage deal in addition to a sufficient deposit for the new home.
The interest rate with a Help to Buy mortgage can be higher than with a normal mortgage. So in order to get the best rate, it pays to shop around.
There are restrictions with the Help to Buy scheme; for instance, it can’t be used to buy a second home and you can’t rent out the property after you buy it. You also can’t use this scheme with Shared Ownership properties.
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