If you have been dreaming of buying your own home but think you need a large cash deposit, think again. The government's Help to Buy mortgage guarantee scheme has already helped thousands of people to become homeowners. The latest extension of the scheme means that you could soon be one of them.
If you can find a cash deposit of at least 5% of the price of the home you want to buy then Help to Buy will help you get a mortgage for the rest.
You don't just have to be looking at newly-built properties. Older homes are also eligible, which gives buyers a much wider choice. If you would prefer to buy a well-established property in a convenient location rather than a new property in an area that doesn't suit you, Help to Buy can help you.
And you don't have to be a first-time buyer to get help now. If you already own a home and want to move, but don't have enough equity to fund a 20% deposit on another property Help to Buy is there to assist.
Get a 95% mortgage with Help to Buy
Many would-be buyers have sufficient income to be able to afford mortgage repayments but find that mortgage companies won't lend more than 80% of the price of a property. Help to Buy enables such buyers to get a mortgage of up to 95% by giving the lender a guarantee for the difference.
Say that you want to buy a home for £200, 000 but you only have £10, 000 deposit available. You can then approach one of the mortgage companies which have signed up to the scheme – which includes the major high-street banks – and apply for a mortgage for the remaining 95% i.e. £190, 000.
Ordinarily they might not be willing to give you such a high loan-to-value mortgage. But under Help to Buy they can obtain a government-backed guarantee to cover the difference between the 80% they would normally have lent and the 95% they will lend under the scheme – in this case £30, 000.
Of course it helps if you can find a deposit of more than 5% as this will help reduce your mortgage repayments.
Help to Buy is available on all properties up to £600, 000 so there is little restriction on choice.
Lenders who can help you with Help to Buy
If you want to apply for a mortgage under the Help to Buy you will have to apply to one of these approved lenders:
- Bank of Scotland
- Virgin Money
Your chosen lender will process the application in the same as for any other mortgage, and you don't have to pay any additional fees to the lender or the government. The lender will check that you can afford the mortgage and that you do not have a history of payment difficulties.
If approved, the mortgage will work the same as any other mortgage and you will have to make the usual monthly repayments.
Some restrictions do apply
There are a few other restrictions on the scheme:
- you mustn’t own any other property anywhere in the world at the time you buy your home (if you are selling a property the sale can be completed at the same time as the purchase in the usual way. )
- your mortgage must be a repayment one, not interest only. Offset and guarantor mortgages are also excluded from the scheme
- you can’t let out the property to somebody else
- you cannot use the mortgage guarantee scheme with any other government scheme such as equity loan or shared ownership. Your deposit for the property can’t come from a government scheme either.
With property prices on the rise again it could be worth getting a Help to Buy mortgage to buy a home now rather than waiting while you save up a larger deposit.
Don't forget Stamp Duty and legal fees
You will also need to remember that you will have to pay land registry fees and any stamp duty together with your legal fees any out of your own money, as well as any other costs associated with the purchase such as survey fees.
Once you have found a home to buy it is wise to employ an expert conveyancing solicitor who has dealt with many similar transactions and can make sure your transaction is completed swiftly.
Agents will often try and steer you to a particular solicitor but this is not always in your best interests – they won't tell you that they get a kick-back from the solicitor for every client they introduce. The solicitors will want to keep the agents happy so they are likely to put their interests before yours.
Instead you should get a few quotes, and go with solicitors that you are happy with and will represent you properly. This is where we can help, as we work with some of the best conveyancing solicitors in the country to ensure that you will get the best possible service at a very reasonable price.