Editor's PickInvesting

What is a Help to Buy Mortgage and Why Should You Get One?

2 Mins read

It can be tough to find a great home when you’re a first time buyer.

The majority of the time, you will need a mortgage to make your purchase and even with a great mortgage loan, it can be difficult to make the expected 20% down payment for the property.

If you’re struggling to find a suitable mortgage deal or you quite have enough to pay 20% of your dream home’s value, it’s worth taking a look at Help to Buy mortgages. This is a government scheme that has been created to help first time buyers get onto the property ladder.

In this article, we’re going to run through what Help to Buy is, how it works, and why you should consider getting a Help to Buy mortgage.

What is Help to Buy?

With the Help to Buy scheme, you can buy a new-build property and you only need to make a down payment of 5% of the property’s value.

The government will then provide an equity loan of 20% of the property’s total value. The remaining 75% of the payment for your new home then comes from your mortgage. If you live in London, the government provides a 40% equity loan and you will need a mortgage for the remaining 55% of the new build’s sale value.

You can also access better mortgages with lower interest rates when you’re on the Help to Buy scheme.

Who Can Apply for Help to Buy?

Help to Buy works through the government and it’s available to anyone who meets the criteria. To get a Help to Buy loan, you need to:

Be a first time buyer above the age of 18

Buy a new-build home that is registered as a Help to Buy property

Put down a payment of 5% of the property’s value

Be able to afford the fees and interest payments

You cannot apply for Help to Buy if you have previously owned a home, whether in the UK or abroad.

The maximum property price that you can purchase with Help to Buy varies depending on which region you live in. According to the government Help to Buy page, the maximum property purchase prices for each region in England are as follows:

North West – £224,400
North East – £186,100
Yorkshire – £228,100
West Midlands – £255,600
East Midlands – £261,900
East of England – £407,400
London – £600,000
South West – £349,00
South East – £437,600

Why Should You Get a Help to Buy Loan?

The Help to Buy scheme reduces the amount of money that first-time buyers need to borrow from mortgage lenders. It also provides them with access to better mortgage deals with lower interest rates, which can save first time home owners money in the long run and is helpful when UK mortgage arrears are at their highest in 12 years.

The 20% equity loan that the government provides on the scheme is interest free for the first five years, after which point interest starts at a rate of 1.75%. The interest payment can be spread throughout the whole year to make the repayments more manageable.

You have 25 years to repay your equity loan. If you sell the property, you must repay the equity loan in full.

Related posts
Editor's PickInvesting

Workers at UK’s biggest container port in Felixstowe to walk off the job for eight days

2 Mins read
Workers at the UK’s biggest container port will go on strike for more than a week later this month in a dispute…
Editor's PickInvesting

Covid loans make UK taxpayers shareholders in cannabis oil firm

2 Mins read
British taxpayers are now shareholders in a further 65 companies because of a government rescue funding scheme set up during the Covid…
Editor's PickInvesting

Twitter says Musk is ‘conjuring’ excuse to escape takeover deal

2 Mins read
Twitter has rejected Elon Musk’s claims in court that he had legitimate reasons to back out of a $44bn deal to purchase…
Power your team with InHype
[mc4wp_form id="17"]

Add some text to explain benefits of subscripton on your services.

Leave a Reply

Your email address will not be published. Required fields are marked *