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Ten things to know about Help to Buy

The Help to Buy scheme has provided a huge amount of first time buyers and those who would never have been able to save for a deposit the chance to climb that first rung on the property ladder.

The scheme itself is helping to build and complete even more properties for you to purchase. Just this June alone the Guardian reported that over 4,300 new properties were completed and funded by the Help to Buy scheme.

There are numerous advice articles online that you can read about how the scheme can benefit you; click here for a detailed guide, but to get things started here are ten things you need to know about:

  1. There are four types of Help to Buy ownership schemes you can sign up for, depending on your situation: Help to Buy Equity Loans, Help to Buy Mortgage Guarantees, Shared Ownership and Help to Buy: NewBuy
  1. The Help to Buy Equity Loan scheme can only be used by first time buyers and home movers, those buying a second home or a property to rent out cannot take part.
  1. When buying a house you must provide an upfront deposit of 10% of the house value, with Help to Buy you need only deliver 5%.
  1. The Government then lends you an Equity Loan, which is 20% of the purchase price and you borrow the remaining 75% from a mortgage lender, such as your bank or building society.
  1. For the first five years you don’t have to pay interest on the 20% Government loan, in the sixth year you will be charged 1.75% interest on top of your repayments. This loan must be paid after 25 years or when you sell your home.
  1. The Mortgage Guarantees scheme allows you to buy a home with a 5% deposit and if for some reason you are unable to pay your mortgage the Government will cover your costs until you can begin making payments again. The Government provides the guarantee to your mortgage lender, not you.
  1. If you decide to opt for a Shared Ownership scheme this will be provided by a housing association. You buy a share of the house (between 25-75% of the property’s value) and pay rent on the remaining share. You’ll need a mortgage still to pay off your share of the home’s value. The Shared Ownership scheme is great for older people and those with disabilities who are struggling to own a property.
  1. You can increase your share hold any time and if you own 100% of the property you can sell it yourself. However, if you do not own the property and choose to sell the housing association has the right to buy it back from you for the percentage of the property you own.
  1. The NewBuy scheme lets you buy a new home with a deposit of 5% of the purchase price and can only be used on a new build, along with the same requirements as the Equity Loan scheme (not a second home, renting out etc.)
  1. The most popular Equity Loan and Mortgage Guarantee schemes cover properties costing up to £600,000 in England, £400,000 in Scotland and £300,000 in Wales.

This quick breakdown should hopefully provide you with some clear and concise information, to help you decide which scheme is best for you, whether you are a first time buyer eager to move in with your partner or a home owner looking to upgrade to a bigger property, but looking for help when it comes to those overwhelming upfront costs.

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