Help to buy schemes can vary from country to country, follow the links to find the right scheme for you:
Help to Buy - England
In England, the help to buy scheme works in 3 ways: Equity Loans, Mortgage Guarantees and what’s known as a NewBuy scheme.
Help to Buy equity loans
A Help to Buy Equity Loan is available to anyone looking to buy a newly built home. The government will lend you up to 20% of the property’s purchase price, as long as you’re putting in at least 5%. However, you’ll still have to borrow the rest from a mortgage lender.
So, if you were looking at a home worth £250,000:
- You’d have to save £12,500
- The government would add £50,000
- A lender would top that up with £187,500
Why are Help to Buy equity loans so attractive?
They’re attractive because you don’t pay interest or fees on the equity loan for the first five years you have it. In the sixth year, you’ll be charged 1.75%; after that, the charge rises by inflation based on the Retail Prices Index (RPI) plus 1% each year.
Incidentally, the fees don’t go to help pay off the loan. The loan has to be paid back after 25 years or when the property is sold – whichever comes first – along with a share of any increase in the property’s value. You can pay back the loan without selling your home, as long as it’s worth 10% of the value of the property (the minimum you can pay back is 10% of the market value).
Help to Buy mortgage guarantees
With the mortgage guarantee, the government doesn’t actually provide any money towards your purchase. What it does do, is promise to cover any losses your bank or building society may suffer if you default on a repayment mortgage.
Why are Help to Buy mortgage guarantees so attractive?
In theory, the support should make it easier for you to get that mortgage approved with a relatively low deposit. You present a lower risk to the bank or building society. What’s more, there are no restrictions here on how old the property is – you could apply for a mortgage guarantee on a new-build or an old cottage.
There are, however, limits on the value of property that qualify:
- England - £600,000
- Scotland - £400,000
- Wales - £300,000
And you can’t apply for a mortgage guarantee on a second home or a buy-to-let, or if you’re intending to use another home buying scheme. The scheme’s designed to run until 2020.
Don’t forget, all of our example figures leave out things like arrangement fees, solicitors and surveyors costs, and in both cases you’ll be responsible for paying the mortgage. Check you can afford it. Repayment amounts may go up or down over time, and your home is at risk if you do not keep up to date with your payments.
Help to Buy NewBuy
Help to Buy NewBuy works like the equity loan. It’s only available for new build homes, you only need to save 5% of the purchase price and the government will give you a further 20%. Much like the mortgage guarantee, the NewBuy scheme involves the government making a promise, rather than loaning funds to aid your purchase.
Here’s how it works:
- The government is working with a number of house builders (which is why the scheme’s only available on new builds). An indemnity fund has been set up, to which the builders have added 3.5 per cent of the purchase price of each property sold.
- The purpose of this is to underwrite mortgages, on lenders’ behalves. By having those mortgages underwritten (reducing the risk), lenders are happier to help people with a deposit as low as 5% of the purchase price.
- Then if lenders suffer losses and the indemnity fund runs dry, the government will add in another 5.5% of the total purchase price – to cover the deficit.
How is this different to the Help to Buy mortgage guarantee?
The difference is in the mortgage you can get. Only six lenders offer NewBuy mortgages at the moment: Santander, NatWest, Nationwide, Woolwich, Aldermore and Halifax and you will have to pay interest from the start of your agreement. The scheme is only available for properties up to £500,000 – and it’s due to close at the end 2015.
Having said that, you don’t have to be a first-time buyer to qualify and as with other schemes there’s no income limit. However, you can’t use Help to Buy NewBuy with any other publicly funded mortgage scheme – and while you’re repaying part of the NewBuy loan each month, you won't have to pay the extra fees after 5 years.
How do I access Help to Buy schemes in England?
Contact the Help to Buy government agent in your area, who’ll explain which criteria you need to meet and the full details of what’s available in your area. If you qualify, then the Help to Buy agent can also help you buy a home through the Help to Buy equity loan scheme. Or, if you’re interested in the mortgage guarantee products or NewBuy specifically, then talk to your lender.
Help to Buy – Scotland
Help to Buy in Scotland can only be used to help buy a new build property from a builder who’s taking part in the scheme. Although your income isn’t taken into account, you won’t qualify if it looks as though you could actually afford to pay more than 90% of the purchase price.
Help to Buy – how it works
You’ll need a deposit of at least 5% of the purchase price of the property, and that home can’t cost more than £250,000. Then, your deposit and your repayment mortgage will cover a minimum of 80% of the purchase price; the Scottish Government contributes the remaining 20%. And, as in England, that 20% is an interest-free loan.
What is the New Supply Shared Equity scheme?
Shared equity is a way to buy a home without having to fund all of it. The New Supply Shared Equity scheme is a way to own between 60% and 80% of a new build property, with the Scottish Government contributing the rest. When you sell the property, you have to repay the government.
You need to have a small deposit, but you won’t have to pay interest on the part that’s funded by the government. And you can ‘buy more’ of the property, as time goes buy, until you own it all.
What is the Open Market Shared Equity scheme?
It’s similar to the New Supply Shared Equity scheme – but, importantly, it’s not limited to new build properties. What’s more, it allows you to own up to 90% (the minimum is 60%) of your home. Applications are assessed by registered social landlords who administer the scheme on behalf of the Scottish Government.
Homebuy – Wales
In Wales, the Homebuy scheme offers from 30% to 50% of the purchase price of a property as an equity loan. Its main aim is to help people who would otherwise need to be living in social housing. It’s an equity loan that can be repaid at any time.