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What Is Help to Buy?

With property prices rising, saving a 20% deposit seems like an impossible task. With Help to Buy you can eliminate this huge cost.  Help to Buy is a government scheme which could make getting on to, or moving up, the housing ladder more accessible.  It helps existing home owners and first time buyers purchase a home with as little as 5% deposit.

Who is eligible?

To be eligible you must;

  • have a deposit of at least 5%
  • be looking to buy a home worth £600,000 or less
  • be purchasing a property you intend to live in most of the time (this means you can’t buy a property you intend to let out or use as a second home)
  • be buying your only home
  • Be either an existing home owner or a first-time buyer

There are two parts to the Help to Buy scheme

Equity Loans

A Help to Buy equity loan is only available to people who want to buy a new build homes worth up to £600,000.

How it works

  • The government lends you up to 20% of the property’s value as an equity loan;
  • You’ll need a deposit of at least 5%;
  • You’ll need to get a mortgage of 75% of the property’s value.

For example, if you want to purchase a home worth £200,000, the percentages would break down as:

  • A £40,000 loan from the government
  • A £10,000 deposit put down by you
  • £150,000 from a mortgage lender.

The benefit to getting an equity loan from the government is that with a larger amount to put down, you’ll hopefully get a better mortgage rate from your lender.

Mortgage Guarantees

The scheme is intended to increase the availability of mortgages at competitive interest rates for buyers with a minimum of 5% deposit.  Most of the UK’s biggest mortgage lenders have signed up to offer Help to Buy mortgages, as well as smaller lenders.

How it works

  • You’ll put down a deposit of at least 5%
  • You can borrow up to 95% of the property’s price from a mortgage lender.
  • The government will then guarantee any mortgage borrowing above 80% of the property’s value.
  • For example, if you took out an 85% mortgage the government would guarantee to repay your lender up to 10% of its value if you defaulted.

Mortgage Advice

At Edison Ford we have our own independent mortgage advisor, Mike Ford who can provide you with impartial advice and competitive mortgage rates from a whole market of lenders.  Get in contact with us today to arrange a free consultation.

About The Author

Everyone at Edison Ford works as a team to bring you this content. The content is either written by Kieran or Peter and the advice included in our guides comes from our own experiences and research collectively. We hope you find our content insightful and if you have any suggestions, then please feel free to email Peter. You can read more about everyone here.

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