The Help to Buy scheme was introduced in 2013 to help hard-working people like you take steps to buy your own home. The scheme offers an equity loan of up to 20% of the cost of your newly built home, so you only need a 5% deposit and a 75% mortgage to make your dream of home ownership a reality.
The Help to Buy scheme has helped over 135,000 families across the UK to buy their own home, and the government is committed to helping even more people onto the property ladder.
The Help to Buy: mortgage guarantee scheme offers maximal benefits for borrowers who put down a 5% deposit on their newly built home. The scheme protects lenders in case of borrower default, to a degree, which in turn allows these lenders to offer better mortgage terms. In order to qualify, you must choose a home that is worth no more than £600,000 and you must be a first-time buyer or have not owned a home in the past three years. If you meet these criteria, the government will guarantee up to 15% of the mortgage, which means that you only need to secure a 5% deposit and a 75% mortgage to buy your dream home.
1. What is a Help to Buy mortgage?
A Help to Buy mortgage is a government-backed mortgage that helps first-time buyers and existing homeowners with limited equity buy a newly built home. The Help to Buy: Equity Loan scheme is available on new build homes in England worth up to £600,000. The loan is interest-free for the first five years and is repayable when the property is sold or re-mortgaged.
The aim of the Help to Buy scheme is to make it easier for people to get on the property ladder. In England, this is done by offering an equity loan worth 20% of the property’s value, which means that buyers only need a 5% deposit and a 75% mortgage to make up the rest.
The Help to Buy scheme is not just for first-time buyers. It is also available to people who used to own a home but can’t afford to buy one now, as well as homeowners who want to move but can’t afford to do so without selling their current property.
The equity loan is interest-free for the first five years and is repayable when the property is sold or re-mortgaged. There are no monthly repayments to make during this time, however, buyers are required to pay back the loan as a lump sum when they sell the property or at the end of the 25-year term, whichever comes first.
The Help to Buy scheme has helped over 130,000 people in England buy a new build home since 2013 and has been extended until March 2023.
2. What are the benefits of a Help to Buy mortgage?
When it comes to home ownership, a Help to Buy mortgage can offer a number of benefits. For one, these mortgages can help make purchasing a home more affordable. In addition, Help to Buy mortgages can also offer buyers the opportunity to put down a smaller down payment than they would otherwise need.
Another potential benefit of a Help to Buy mortgage is that buyers may have the opportunity to qualify for a larger loan than they would if they were to go through a traditional lender. This can be helpful for buyers who are looking to purchase a more expensive home. Additionally, buyers who have a good credit score may be able to find a Help to Buy mortgage with a lower interest rate than they would get from a traditional lender.
buyers should be aware that there are also some potential drawbacks to these mortgages. For one, buyers may be required to pay a higher interest rate on their loan than they would with a traditional mortgage. Additionally, Help to Buy mortgages typically have shorter terms than traditional mortgages, which means that buyers will need to refinance their mortgage more often.
Before deciding whether or not to pursue a Help to Buy mortgage, buyers should carefully consider both the potential benefits and drawbacks. By doing so, they can be sure that they are making the best decision for their individual situation.
3. How can I maximize the benefits of a Help to Buy mortgage?
When you are looking to purchase a home, it is important to consider all of your options in order to find the best fit for you. A Help to Buy mortgage can be a great option for many first time home buyers, but it is important to understand how to maximize the benefits of this type of mortgage. Here are three tips on how to do just that:
1. Consider your down payment options.
When you are putting together your down payment for a Help to Buy mortgage, you have a few different options. You can use money from your savings, gifts from family or friends, or even the equity in your current home. Talk to your mortgage advisor to see what option makes the most sense for you and will help you get the best rate.
2. Shop around for the best deal.
Just like with any other type of mortgage, it is important to shop around and compare rates from different lenders. Be sure to compare the terms and conditions of each mortgage so that you understand what you are signing up for. It is also important to remember that the interest rate is not the only factor to consider – be sure to look at the overall cost of the mortgage and what you can afford.
3. Get help from a professional.
If you are feeling overwhelmed by the process of shopping for a Help to Buy mortgage, it may be helpful to seek out the assistance of a professional. A mortgage broker can help you compare rates and terms from different lenders and find the mortgage that is best for you. They can also help you with the paperwork and answer any questions you may have.
By following these tips, you can be sure that you are getting the most out of your Help to Buy mortgage and taking the first step towards homeownership.
4. What are the challenges of a Help to Buy mortgage?
The Help to Buy scheme was introduced in 2013 to help first-time buyers and existing homeowners purchase a home with a small deposit. The scheme offers a government-backed loan which can be used for up to 20% of the purchase price (40% in London).
There are a number of challenges that come with a Help to Buy mortgage. One of the main challenges is that the loan is only available for certain types of properties. The property must be your only home, it cannot be a second home or buy-to-let property. This can limit your choice of property if you have a specific type of property in mind.
Another challenge is that the loan is only available for a limited time. The loan must be repaid within 25 years or when you sell the property, whichever comes first. This means that you will need to make sure you can afford the repayments each month. If interest rates rise, this could make your monthly repayments more expensive.
Another challenge is that the Help to Buy loan is not available for everyone. You must be a first-time buyer or an existing homeowner to qualify for the scheme. This means that if you are looking to buy a property with a partner who is a first-time buyer, only one of you will be able to apply for the Help to Buy loan.
The Help to Buy scheme can be a great way to buy a property with a small deposit. However, there are a number of challenges that you need to be aware of before you apply for a Help to Buy mortgage.
5. How can I overcome the challenges of a Help to Buy mortgage?
When it comes to overcoming the challenges of a Help to Buy mortgage, the key is to work with your lender and understand the program requirements. One of the biggest challenges is being able to afford the increased monthly payments that come with a Help to Buy mortgage. There are a few ways to overcome this:
-Make sure your budget can handle the extra payments by cutting back on discretionary expenses.
-Create a buffer by making payments early or adding to your monthly payment.
-Look into downpayment assistance programs or grants that can help with the downpayment or monthly payments.
Another challenge is that Help to Buy mortgages typically have higher interest rates than traditional mortgages. To overcome this, you can:
-Look for a lender that offers a competitive interest rate.
-Refinance your Help to Buy mortgage after you’ve built up equity in your home.
The final challenge is that Help to Buy Mortgages typically have shorter terms than traditional mortgages. This means you’ll need to be prepared to make higher monthly payments for a shorter period of time. To overcome this:
-Create a budget and make sure you can afford the increased payments.
-Look into refinancing options after you’ve built up equity in your home.
By understanding the challenges of a Help to Buy mortgage and taking steps to overcome them, you can make the most of this program and enjoy the benefits it provides.
As the Help to Buy mortgage scheme comes to an end, it’s important to understand the different options available if you’re looking to buy a property. With a Help to Buy mortgage, you can buy a new home with a 5% deposit, compared to the usual 10-20%. However, there are a few things to consider before taking out a Help to Buy mortgage, such as the high interest rates and the need for a larger deposit if you want to move house or remortgage in the future. It’s important to speak to a mortgage advisor to make sure a Help to Buy mortgage is the right option for you.