Help to Buy Mortgage

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Since April of 2013, there has been a government-backed incentive in place in the United Kingdom to help first time buyers purchase their first home and it’s the aptly named Help to Buy Scheme. The government has recently confirmed that this assistance is set to continue for the foreseeable future, guaranteeing that it will be available until at least 2023.

Essentially, what the scheme offers is an equity contribution of 20% across the majority of England, with 40% being provided to first time buyers in London due to the property prices in the area. This means that those taking advantage of a Help to Buy mortgage only need to put down a 5% deposit, which is considerably lower than the industry norm of around 15-20%.

The aim of the Help to Buy mortgage scheme is to help people who would otherwise have no possibility of affording the deposit for even an averagely-priced home, which currently stands at around £250k in the UK. Here we take a look at the scheme in closer detail, honing in on exactly what it is you need to know.

So, let’s take a look at the facts.

Well, the scheme is available in various guises across the UK, but for the purposes of this content, we are referring only the scheme that exists in England. Each country within the UK operates the scheme in its own way, with its own set of rules, so if you don’t live in England, you need to check the specific rules that exist on the government websites for the country you live in.

Not every mortgage lender offers a Help to Buy mortgage product, so you’ll need to find one that participates in the scheme. However, once you do, it’s possible to enjoy mortgages with fixed interest rates, discounted rates, and tracker rates. In fact, it’s even possible to get cash back deals, so long as the lender is part of the incentive.

The rates you sign up to will relate to the mortgaged part of your borrowing, whereas the equity contribution will be interest free for the first 5 years after which it switches to a 1.75% rate per year, before rising to 1% above inflation or RPI (Retail Price Index).

Actually, it’s not, no, as the equity loan is linked to the total price of the property. Should the price of the property rise by 10% before you sell it, you’ll be expected to pay back the original loan amount plus 10% or 20% if it rises by 20% and so on. However, it swings both ways and if your property were to drop in price, your loan will drop in line with this decrease, so you don’t lose out.

In order to apply for a mortgage of this kind, you won’t be able to go direct to a mortgage lender. Instead, you’ll need to get in touch with your local government-approved Help to Buy agent. Use our 60 Second Mortgage Qualifier to see if you are likely to be accepted for a mortgage and then we can match you with an adviser to guide you through the process.

Help to Buy agents are government-approved and are there to help you through the whole thing. They can help with all the paperwork and the various obligations that you will have to fulfill. If it’s your first time buying a home (which it will be or you wouldn’t qualify), this kind of support is invaluable and can make what can be a quite daunting process at the outset, a much smoother and relaxed one.

Absolutely, you can apply for a Help to Buy mortgage when you’re self-employed, but if your income is unreliable, then it could affect your chances. Not all mortgage lenders offer Help to Buy products and some don’t cater for self-employed people, so it can mean that your options are limited, but if you can prove affordability, your chances of being approved can rise significantly and in all probability, there will be a mortgage out there for you.

Yes, it is possible, but it can be a little more tricky than a standard remortgage. It’s something to perhaps consider when you get to the end of the first 5 years and the equity loan part of your agreement starts to incur interest and fees. After 5 years, there’s a likelihood you’ll have built up some of your own equity, so your options should broaden, even taking the terms of the government’s contribution into account.

Yes, there is a maximum amount in regards to the purchase price of your Help to Buy mortgage and it is set at £600k. Now, this might seem like quite a high figure, but the scheme is designed to be available to everyone and the average property price in London is almost £480k (just over double that of everywhere else in England). The good news is that this means you shouldn’t be prevented from getting the property you want because of it’s cost, but you will obviously have to prove affordability.

Help to Buy mortgages are extremely useful in helping first time buyers to get on the property ladder and they also help to boost the UK housing market as a whole. For those who can afford a mortgage, but simply can’t get the requisite deposit together for a standard mortgage, it can literally mean the difference between owning your home and not being able to.

If you’re someone that this applies to and you think that you could benefit from the opportunity that it provides, we recommend that you get in touch with your local Help to Buy agent. As a first time buyer, it can all seem a bit scary, but if you’re thorough, you choose the property wisely and you can prove affordability, you too could be having the keys to your very own home in the near future and with someone who knows what they’re doing in your corner, it shouldn’t be traumatic either.