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Who is eligible for the Help to Buy scheme?

The Help to Buy government scheme is launched today, which will help first time buyers and existing home owners to purchase a house with as little as a 5% deposit. High Street banks including Natwest, RBS, Halifax and Bank of Scotland will start offering new Help to Buy mortgages this week. Under this scheme there are two ways to purchase a property up to the value of £600,000.

The first is for buyers looking to purchase a second hand home and it is effectively a mortgage guarantee.  Under the scheme buyers will only need a deposit of as little as 5%.  Depending on the size of the deposit, the government will then guarantee the repayment of the mortgage to the lender.  This is all done behind the scenes by the participating lender.

The following eligibility applies -

  • Available to both existing home owners and first-time buyers

  • Buyers need a minimum of a 5% deposit

  • Must be your only property

  • Available on all previously owned and new build properties up to
    the value of £600,000

  • Borrowing from a participating mortgage lender

  • Available for properties in the UK

The other scheme which is the equity loan scheme has been in force for some time and this scheme is for new builds only and the government loans you up to 20% of the cost of a new build home, which means you only need a 5% deposit and a 75% mortgage to make up the rest.

The following eligibility applies -

  • Available on new build properties only up to the value of

  • Equity loan scheme, using a government equity loan of 20%, which
    will need to be   repaid on sale of the

  • Buyers need a minimum of 5% deposit

  • Must be your only property

  • Available to both first-time buyers and existing home owners

You will have to pay back the equity loan amount when you sell the property or at the end of your mortgage period (whichever comes first).  You will need to pay back 20% of the sale price.  This could be more than the original loan amount if the value of your home has increased whilst you have owned it.  For the first 5 years of the loan you will not have to pay any loan fees on the 20%, however from year 6 onwards you will be charged 1.75% of the loans value, which will increase every year by the retail price index plus 1%.

At Inspire Estate Agents Crawley we are convinced the new Help to Buy scheme is going to be like a shot in the arm for the housing market, one which is already increasing rapidly growing in price.  It will definitely help a high number of buyers who are struggling to get together the usual minimum 10% + deposits required and make mortgages more accessible; therefore helping people move on and up the property ladder.  However, we have an underlying concern that this scheme could inflate the property market too quickly and in the longer term when the scheme is withdrawn then prices could hit reverse!

If you have any questions about this scheme we would love to hear from you and would be happy to help explain it in more detail.