Whether you’re looking to get a foot on the property ladder or wanting to up-size, the deposit you need to pay can seem, at times, unattainable. To help make this step easier for first time buyers or home movers, the government introduced a scheme called ‘Help to buy’.
To many, this scheme may seem confusing as there are two separate parts both operating under the same name: the Help to Buy Equity Loan and the Help to Buy Mortgage Guarantee.
The first of these two phases, the equity loan, is only available to first time buyers or individuals looking to upsize to newly built houses. Borrowers only need to raise a 5% deposit and borrow another 20% from the government. This loan is 5 years interest free so in the meantime, all you need to think about is paying the final 75% with typical mortgage repayments.
The second phase is called the mortgage guarantee. Unlike the first phase, this is not just exclusive to new builds and includes all properties up to £600,000, for both first time buyers and home movers. Again, borrowers only need to raise that 5% deposit, but this phase sees home buyers paying a 95% mortgage. The government does not directly loan the borrower any money, instead they provide a guarantee of 15% of their mortgage loan to the lender. This means that you won’t have to pay back any fees to the government.
According to GOV.UK, it seems that ‘Help to Buy’ has been really successful as the scheme has hit a total of 73,000 purchases in the UK. The Daily Telegraph announced that 80% of the users buying houses under the scheme have been first-time buyers which is great news as it has allowed a large number of people to join the property ladder. The scheme is also set to continue into 2020, and provide home buyers with further support in the future.
To allow homebuyers to make sense of the ‘Help to Buy’ scheme, NatWest has recently released an infographic which breaks down these two phases into smaller and more understandable pieces of information which can be seen below: