We explain what you need to know about Help to Buy – the government’s schemes aimed at first-time buyers with low deposits and current owners with limited equity.

BACKGROUND ON HELP TO BUY!

Help to Buy is expected to help make up for the lack of higher loan-to-value products available.

While it’s still occasionally possible for people with a deposit of only 5% to get on the property ladder, the government felt there should be more competition between mortgage lenders to provide greater choice to home buyers.

Savings rates and wage increases are also well below the rate of inflation, making it harder for buyers to save a deposit.

Another big reason for the introduction of the scheme comes down to current house prices, which have risen by 3.3% in the past year. If they continue to rise at this rate, people with deposits of 5% to 10% will find it even harder to buy a property in the future.

Help to Buy has so far been very successful. The number of homes bought through the equity loan scheme topped 12,500 by the end of August 2013, putting it on track to meet the government’s target of 74,000 homes by 2016.

 Help to Buy – key facts

Mortgage guarantee scheme – what you need to know

If you’re thinking of applying for the Help to Buy mortgage guarantee scheme, you’ll need to consider the following:

  • Borrowers will need to pass affordability checks with mortgage lenders. This varies by lender, but usually involves them checking that you’ll still be able to meet payments should interest rates go up.
  • Borrowers will need to state that they have no interest in any other property worldwide, or won’t have by the time they complete on a mortgage guarantee scheme mortgage product.
  • You may be able to apply if you’ve had minor credit problems in the past, but you’ll still need to pass the mortgage lender’s credit checks.
  • Borrowers need to have at least a 5% deposit, and be able to cover costs, for example Stamp Duty and any legal and valuation costs.
  • If you want to rent out the property you’re going to buy, the Help to Buy schemes