Myth busting the ‘Help to Buy’ scheme
The Governments Help to Buy scheme is set up to help people buy a home who don’t have a large deposit.
The Help to Buy scheme aims to help buyers who have a deposit of at least 5% to buy a new home up to the value of £600,000. The government will lend you up to 20% of the value of your new home via an equity loan, so you will only need to secure a 75% mortgage. The equity loan is interest free for five years and you can pay it back at any time or on the sale of your home.
There are many misconceptions around the scheme, and this article tackles the top four.
MYTH – It is just for first-time buyers.
This initiative is available to help all homebuyers, not just first time buyers, to own their own new build home in England. As long as it is a residential repayment mortgage, not a buy-to-let.
MYTH – The scheme is only available in England.
No, the Mortgage Guarantee phase of Help to Buy is available across the UK. The equity loan phase of Help to Buy is available in England and Scotland for new-build properties only up to £600,000 in England and properties up to £200,000 in Scotland.
MYTH – I need to pay back the loan in five years
The Help to Buy equity loan is interest free for the first five years, after which you will be required to pay an interest fee of 1.75% of the amount of your Help to Buy shared equity loan at the time you purchased your property, rising each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%. These repayments will sit alongside your mortgage repayments. The loan itself is repayable after 25 years or on the sale of the property if earlier.
MYTH – I won’t own my home
Not true. A Help to Buy Mortgage Guarantee is essentially the same as a traditional 95% repayment mortgage, with all the usual terms and conditions between you and the lender. In reality you may not even spot it is a Help to Buy mortgage, other than being a 95% loan to value. Equity Loan Help to Buy mortgages on new build properties obviously have more rules.
MYTH – the paper work is so complicated that no applications are approved
Not true. If you are worried about the paperwork, we can recommend an independent financial advisor to assist you.
For further information and a full list of terms and conditions see our Help To Buy pages or speak to one of our Sales Executives who will be happy to assist.