Changes to the Government's Help to Buy scheme.

18 January 2021

Changes to the Governments help to buy scheme.

Are you itching to buy your own place? Is it taking an AGE to save the deposit?

The government’s Help to Buy scheme is designed to help people get on to the property ladder with a deposit as low as 5%.

The scheme works by offering an equity loan of up to 20% of the purchase price interest free (for 5 years) to help bolster your deposit.

Help to buy has been around a while but from April 2021 it will be updated to include a few new conditions including regional purchase price caps (find more detail on this in our free PDF guide) and is now only open to first time buyers.

 

So, how does it work? 

On the face of it, the scheme may look complicated, so we’ve broken it down into some simple headlines:

  • You need a 5% deposit
  • The Help to Buy equity loan can cover between 5 - 20% of the purchase price.
  • a repayment mortgage is the last piece of the Jigsaw and will cover the balance of the purchase.

As illustrated in the examples below.

 

 

 

 

 

  • The loan is interest free for the first 5 years. There is a £1 per month management fee to pay.
  • From year 6 you will have to pay the £1 management fee plus the interest on the loan amount. Currently 1.75%.
  • You can pay all or part of the loan back at any time, but it must be paid back in full after the 25 year loan period.
  • It is possible to change your lender to ensure you always have the best deal afforded to you.
  • You must be buying a new build property from an approved builder. So please check that out first. Look for the logo.

 

Great news! Now you have a 25% deposit.

Having a 25% deposit also gives you access to a wider choice of products with more favourable interest rates than say a 95% LTV mortgage. This is a particularly welcome at this time when lenders are less likely to offer 95% LTV mortgages in the present economic climate.

This may sound like a lot to take in especially as it’s your first time! It’s not quite as straightforward as a regular purchase as you have the added task of applying a loan and as well as a mortgage.

 

Independent Advice

An independent financial adviser can be invaluable in this instance.

An adviser will look at your case as a whole, coordinating the mortgage and the loan applications. They can obtain a decision in principal on your mortgage and loan application so you are ready to purchase of your first home with confidence.

Our guide is free to download, and you can find all the up-to-date information at https://www.helptobuy.gov.uk

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
There may be a fee payable for our mortgage service, usually £495, plus we will receive commission from the lender.