A ‘Help to Buy’ is a government-backed scheme intended to help anyone who is facing a difficult time in acquiring a deposit for their first home or are struggling to move up the property ladder due to constrained equity. The two main elements of the scheme are described below:Equity Loan
The first part of the ‘Help to Buy’ scheme was established in April 2013 and has its eligibility limits extended up to 2021. Home movers and first-time home buyers can both make use of this scheme. However, the scheme is only applicable to those homes that are newly built. The advantage of this scheme is that as little as 5% of the property value will be required as deposit by the home buyer. This will be further beefed up by the government by 20% by the Homes and Communities Agencies (HCA). All this combined will raise your deposits to a good 25%, enabling you better mortgage rates form the prospective lenders. The borrowers have the choice to repay the equity loan at any time they find feasible-they will be charged no penalty whatsoever. You can choose to pay either 10 or 20 per cent of the total amount. This holds in cases where the loan at least is worth 10% of the total value of your home.Mortgage Guarantee
This element of Help to Buy scheme called the Mortgage Guarantee is intended to grant home movers and first-time buyers a deposit, increasing their chances of securing a better mortgage. The scheme was officially unveiled in October 2013. This scheme is better understood when referred to as a ‘behind-the-scenes’ kind of arrangement between the government and the lender. This scheme implies that the buyers are required to raise only 5% of the property value, and a further 15% would be added on the part of the government. The building societies and banks are more relaxed while lending larger mortgages since the guarantee comes from the government. These loans bear lower than usual rates that would otherwise be assigned to them.
