Saving for a large deposit can be a long and tiresome journey, and sometimes, may even seem impossible.

Thanks to the government’s Help to Buy scheme, you can now buy a home with as little as a 5% deposit and have lower mortgage repayments than you would with a standard mortgage arrangement.

Looking to apply for a Help to Buy mortgage?

There are a few things to understand before we get started.

The Help to Buy equity loan is a scheme intended by the government to help first time buyers afford to buy new homes in the current economic climate and housing market.

Help to Buy equity loans are only available in England, although similar schemes have been made available by the Scottish Government, the Welsh Government and the Northern Ireland Housing Executive. Equity loans are open to first time buyers who want to buy a new-build property, and who have a 5% deposit available. The government will top up your deposit with an equity loan of up to 20% of the property value – in this case, you would take out a 75% mortgage from a lender to buy the property. For buyers in London only, the maximum equity loan is 40% of the property value. Please see below the maximum property price for each region in England.

 

RegionMaximum property price
North East£186,100
North West£224,400
Yorkshire and the Humber£228,100
East Midlands£261,900
West Midlands£255,600
East of England£407,400
London£600,000
South East£437,000
South West£349,000

If you are interested in the Governments Help to Buy scheme you will need to know a few minimal basics to check if you qualify.

Available to First Time Buyers
The property being purchased must be a new build and priced under the maximum price of the region
You cannot sublet the property
Not own a home or residential land now or in the past in the UK or abroad
Not have had any form of sharia mortgage finance
The scheme is available in England only. Scotland, Wales and Northern Ireland run their own similar schemes
You will need a minimum 5% cash deposit

Although the criteria remains the same for those looking to purchase in London, due to the current property prices in Greater London the upper limit for the equity loan in this area has been increased from 20% to 40%.

This covers the basics but do ensure you get all the required information in relation to how the scheme works before making a commitment.

When looking into your Help to Buy mortgage you will discover that not all lenders participate in the scheme. Those that do will also offer a specific portfolio of rates that will differ to that of their standard mortgages. The good news however, is that typically the rate you will be offered will be priced not solely on the cash deposit you have to put down (usually the minimum 5%) but also inclusive of the equity loan. The lower the loan to value, commonly referred to as LTV, the lower the interest rate and as such help to buy mortgage rates are much more aligned with those who have a 25% deposit to put down.

In general terms the rates offered for help to buy mortgages are priced in the same way as a standard mortgage. You will usually be offered a selection of products with some incurring higher fees than others and some offering benefits such as free property valuation and cashbacks. It is therefore important that you decide upon the best to suit your personal circumstances and loan amount.

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    Keep reading to find information on the home buying process and for answers to some of your main FAQ’s.

    You can also learn about the different types of mortgages and interest rates in our guide.

    Help to Buy: Frequently Asked Questions

    The Governments Help to Buy scheme could help you purchase your new home as a first time buyer or however, what is the Help to Buy process and where do you start.

    Check your eligibility first. The scheme is fairly basic in its criteria but do ensure you meet the minimum requirements first.

    If happy you fulfil the basic eligibility you will now need to check on your budget. This will, in the most part, be determined by the amount of mortgage you can obtain albeit there is a maximum purchase price that applies depending on your region of purchase. In addition to checking how much you can borrow from a lender you will also need to have this checked by the help to buy agent for your area.

    Finally, once satisfied that the scheme is the right thing for you and the numbers involved are attainable, you can now start to look for your new home.

    The Help to Buy scheme was introduced by the Government in 2013 and since this time has helped thousands of people realise the reality of owning their own home however, where do you start in regard to getting a Help to Buy mortgage.

    Firstly, not all lenders participate in the Help to Buy scheme so you need to find out who does, and those that are involved offer specific products outside their usual mortgage schemes. As with all residential mortgages, the amount you need to borrow has to be assessed as affordable by the lender but for a help to buy mortgage, this also needs to be checked by the Help to Buy agent.

    In general terms applying for a mortgage for a Help to Buy purchase is the same as any other however, you just need to ensure that both parties have agreed the loan amount based on affordability. A good broker will assist you in your journey and also offer to complete the Help to Buy agents application with you.

    Recent changes to the Help to Buy scheme have made it more accessible to customers with a less than perfect credit history. People can now be accepted for Help to Buy mortgages if:

    • They are one year discharged from a bankruptcy
    • They have a current IVA
    • They have no mortgage arrears in the past 12 months (previous arrears are accepted)

    In such cases, customers will need to put down a 10% deposit on the property they are looking to buy, rather than the typical 5%.

    To discuss your circumstances and see if you can benefit from the Help to Buy scheme please contact our team on 01634 968111.

    The various Help to Buy schemes have and will continue to represent a step forward in promoting affordable home ownership. However, to ensure you find the scheme or mortgage which presents the right option for you, speak to one of our expert mortgage brokers today.

    At The Residential Mortgage Hub we specialise in Help to Buy and similar schemes, and have helped many would-be homeowners get on the property ladder. We can provide expert, impartial advice on home-mover and first-time buyer mortgages and remortgages.

    Important information

     

    Your home may be repossessed if you do not keep up repayments on your mortgage.

    There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.

    The fee is up to 1% but a typical fee is £476.