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What is a Help to Buy Mortgage and Why Should You Get One?

It can be tough to find a great home when you’re a first time buyer.

The majority of the time, you will need a mortgage to make your purchase and even with a great mortgage loan, it can be difficult to make the expected 20% down payment for the property.

If you’re struggling to find a suitable mortgage deal or you quite have enough to pay 20% of your dream home’s value, it’s worth taking a look at Help to Buy mortgages. This is a government scheme that has been created to help first time buyers get onto the property ladder.

In this article, we’re going to run through what Help to Buy is, how it works, and why you should consider getting a Help to Buy mortgage.

What is Help to Buy?

With the Help to Buy scheme, you can buy a new-build property and you only need to make a down payment of 5% of the property’s value.

The government will then provide an equity loan of 20% of the property’s total value. The remaining 75% of the payment for your new home then comes from your mortgage. If you live in London, the government provides a 40% equity loan and you will need a mortgage for the remaining 55% of the new build’s sale value.

You can also access better mortgages with lower interest rates when you’re on the Help to Buy scheme.

Who Can Apply for Help to Buy?

Help to Buy works through the government and it’s available to anyone who meets the criteria. To get a Help to Buy loan, you need to:

Be a first time buyer above the age of 18

Buy a new-build home that is registered as a Help to Buy property

Put down a payment of 5% of the property’s value

Be able to afford the fees and interest payments

You cannot apply for Help to Buy if you have previously owned a home, whether in the UK or abroad.

The maximum property price that you can purchase with Help to Buy varies depending on which region you live in. According to the government Help to Buy page, the maximum property purchase prices for each region in England are as follows:

North West – £224,400
North East – £186,100
Yorkshire – £228,100
West Midlands – £255,600
East Midlands – £261,900
East of England – £407,400
London – £600,000
South West – £349,00
South East – £437,600

Why Should You Get a Help to Buy Loan?

The Help to Buy scheme reduces the amount of money that first-time buyers need to borrow from mortgage lenders. It also provides them with access to better mortgage deals with lower interest rates, which can save first time home owners money in the long run and is helpful when UK mortgage arrears are at their highest in 12 years.

The 20% equity loan that the government provides on the scheme is interest free for the first five years, after which point interest starts at a rate of 1.75%. The interest payment can be spread throughout the whole year to make the repayments more manageable.

You have 25 years to repay your equity loan. If you sell the property, you must repay the equity loan in full.

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