Help to Buy - The facts : Edinburgh Mortgage Advice

Help to Buy – The facts

Here are the facts about Help to Buy written in plain English to help you understand whether either of these finance schemes are right for you.

Who is Help to Buy aimed at?

Help to buy is aimed at those who want to get on the property ladder and can afford to pay a mortgage – but don’t have a big deposit payment.

What is the minimum deposit payment?

In order to qualify for any of the Help to Buy options (or indeed any mortgage) you must have a deposit of at least 5% of the value of the property you want to buy.

Is it only available to 1^st time buyers?

No, anyone can apply for either Help to Buy scheme.

How does Help to Buy work?

There are two different versions of the scheme, here are the main differences:

Scheme	Help to Buy 1	Help to Buy 2
What is it?	A shared equity scheme, this means that the Government will loan you up to 20% of the value of the property.	A mortgage guarantee scheme, this means the Government will act as a ‘guarantor’ for up to 15% on a standard mortgage should you default on your payments
Can I use it to buy any property	No only new properties	Yes this is available on old and new properties
Minimum deposit	5%	5%
Maximum house value	£600,000 in England£400,000 in Scotland	£600,000
Main impact	When you come to sell the property you must give the Government 20% of the sale price. This means you get 80% of the profits instead of 100%.	Stricter affordability criteria and potentially slightly higher interest rates (as the lender must pay the government a fee for the guarantee).
Can I use it to buy a ‘Buy to Let’ property?	No	No
Examples:	House valued at £200k financed as follows: 5% Deposit £10,000 20% Help to Buy £40,000 75% Mortgage £150,000	House valued at £200k financed as follows: 5% Deposit £10,000 95% Mortgage £190,000
Additional Costs	None for the first 5 years.If you live anywhere in the UK except Scotland then you must pay an annual fee of 1.75% of the loan which rises annually by RPI + 1%. (This does not apply in Scotland)	No

What are the advantages and disadvantages?

Advantages

Disadvantages

Helps those with a small deposit get onto the property ladder

Stricter affordability criteria
Restricted maximum loan due to stricter affordability criteria
The mortgage process takes longer due to the additional steps involved

Are there any other finance schemes which help people with a small deposit buy a house?

YES! There are a number of other options such as LIFT and New Buy, their suitability depends on your circumstances and where you live etc. Please also remember that there are lenders out there willing to offer 95% mortgages with competitive rates to borrowers with good credit scores.

No matter what your circumstances are, talk to us if you would like help to find the best mortgage in the whole market AND sound advice on whether there are any of the home buying finance schemes are suitable for you.