Help To Buy Mortgages available through Read Maurice
What is Help to Buy 2 and how does it differ from part 1?
Help to Buy 1, launched in April, provides a government equity loan worth up to 20 per cent of the purchase price to buyers of new-build properties. The loan is interest-free for the first five years and then borrowers pay an annual fee linked to inflation. This allows borrowers with a deposit of as little as 5 per cent to buy a home with a mortgage of 75 per cent of the property value — some of which are available at below 3 per cent.
The equity loan must be repaid within 25 years or sooner if you sell the property. The amount you pay back is 20 per cent of the sale price. It is only available in England, but the Scottish Government launched a version of the scheme last month.
Under Help to Buy 2, launched this week, lenders pay the Government a fee to guarantee up to 15 per cent of the property’s value against potential losses, so that they can offer mortgages to borrowers with deposits of as little as 5 per cent. These are available on older properties as well as new homes.
Both Help to Buy schemes can be used to buy homes worth up to £600,000 and are not limited to first-time buyers, although they cannot be used to buy a second property or for buy-to-let. The Help to Buy 2 is also designed to help “mortgage prisoners” who have too little equity to remortgage, although the only deals to be revealed so far by lenders are for home buyers. It is available across the UK.
How much will I be able to borrow?
Lenders will need to ensure that you can comfortably afford repayments, so they will be looking at your income and outgoings in detail rather than multiplying your earnings by a set amount.
You will need to have a good credit history because lenders will apply their own scoring system which is likely to be very strict for borrowers with the smallest deposits.
As well as the 5 % deposit, you will also need to set aside money for stamp duty — 1 per cent on homes priced over £125,000 up to £250,000, 3 per cent on homes worth over £250,000 up to £500,000 and 4 per cent on homes worth over £500,000. Of course you will also have to budget for survey costs and solicitor fees.
To discuss further please contact our Financial Adviser Barnaby Bamford on 01242 241122 or 01684 562842.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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