2013 saw the largest initiative seen by the housing market when the Chancellor launched the Help to Buy Scheme. Currently there are two schemes under the Governments Help to Buy Scheme, and equity loan and a mortgage guarantee. These schemes are available for existing homeowners and first time buyers. The scheme is intended to help individuals secure a mortgage with a deposit as small as 5%. Every scheme is varied in terms of how they work and the criteria, below is a small explanation of both to help you decide which scheme would be more beneficial;
Help to Buy Equity Loan
Through the Help to Buy Equity Loan scheme, the Government supplies a deposit contribution of up to 20% of the property’s value. This is then added to a 5% deposit which is contributed by the borrower, enabling them to obtain a 75% loan to value mortgage at a lower rate of interest. The borrower is required to repay the Government equity loan, but in England this is interest free for a 5 year period. When the interest free term of the loan expires, the borrower must then pay a fee of 1.75% on the government equity share. This will rise on a yearly basis by RPI inflation plus 1%.
In order to apply for the Equity Loan scheme, the borrower must be purchasing a new build property as a residential home. The scheme is only available for capital repayment mortgages, and applies to purchases of up to £600,000 in England, £400,000 in Scotland and £300,000 in Wales.
This scheme offers a helping hand to first time buyer contractors who are looking to secure a place on the property ladder, and for those wishing to purchase new property with a relatively low cash deposit.
Help to Buy Mortgage Guarantee
The Help to Buy Mortgage Guarantee scheme is available for new build and resale properties. Through this scheme, the Government guarantees up to 15% of the borrower’s mortgage, hence minimising the risk for the lender. This enables borrowers with a 5% deposit to secure a lower rate on their mortgage, even though the mortgage is up to 95% LTV.
The scheme is available in England, Scotland and Wales, and applies to residential purchases of up to £600,000. The borrower’s equity share must be between 5% and 10% in order to qualify for the scheme.
To find out more about the Help to Buy scheme as a contractor, please contact us on 0844 44 88 801. Our team of experienced and specialised consultant will be happy to help you with your mortgage needs.
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