Help To Buy Houses

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Can I Benefit From The Help To Buy Houses Scheme?

Buying a house for the first time can be financially challenging. The UK government, aware of the difficulties in getting on to the property ladder, have implemented the Help to Buy houses scheme.

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Help To Buy
help@helptobuy.org.uk
0800 009 6634
1st Floor, Suite 2, 40 Charlotte Square, Edinburgh, EH2 4HQ
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Understanding & listened to our requirements

We found so far that they listen & understand our requirements, all ways available to answer any questions that we have had. Like most people who only get chance to check emails after work, when sent or responded to there emails they answer promptly at evenings & weekends. This is the 3rd time we have used the mortgage company and they meet our requirements.

Steve & Amy
Caroline & Nasreen were both very…

Caroline & Nasreen were both very informative and kept me updated all the way through. I had full trust in them right from the beginning. Would definitely recommend and hope to work with them again in the future.

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I was supported right from my first contact. I am going through a divorce and needed quick responses...I was accommodated and supported at all times. My Account Manager Fiona has gone above and beyond her required services.

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Well what can I say from start to…

Well what can I say from start to finish I have had exemplary service Suzy and her team have been amazing keeping my spirits up when I needed a boost and such a friendly knowledgeable manner I would certainly recommend to friends and family and would use again but sincerely hope I don’t need to.

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Fantastic service from Jo and Matt

Fantastic service from Jo and Matt. We have been struggling for a few years to get a mortgage but Jo was able to achieve this for us. We are really grateful.

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Excellent service as usual

Excellent service as usual! Matt and Jodi are amazing! Thank you soo much for your help and answering my crazy questions.

Lisa Tilbrook
First Class Customer Service

Just completed on my first home. A massive thank you to Chris Summerson who found me exactly the mortgage deal I was looking for. Professional and friendly service throughout.

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Absolutely Outstanding Service

Jodi has been utterly brilliant and the service provided absolutely perfect, worth every penny. I urge any first time buyer to use The Mortgage Broker Ltd, it just takes all the stress and confusion out of the process and gives you access to an expert who can answer all of your questions honestly and with ease.

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Such a Positive Experience!!!

Such a positive experience!!! Would recommend it to anyone. Oliver had so much patience with me what is much appreciated. Guys are happy to answer all your questions and are happy to help / explain all documentation which I always struggle with. I'm hoping to hear from them again in about 18 months . Thank you Oliver!

Gosia Olejnik
Excellent and Fast Service

We used the mortgage broker to source a remortgage for our buy to let property. They were very professional and we were very delighted with the deal and service we got from them. Fiona and Becca also kept us updated on the progress of the application and we were able to complete the whole process under 30 days. Highly recommend them to anyone looking for a mortgage broker.

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When using the Equity Loan scheme, Help to Buy will lend up to 20 per cent of the house’s value if you are buying it in England and Wales, 40 per cent for properties in London, and 15 per cent in Scotland. As the buyer you will need to raise a 5 per cent deposit, and the rest should be covered by a mortgage.

This scheme has been extremely beneficial for first-time house buyers. Statistics show that over 236,000 houses in England alone have been bought using the Help to Buy scheme, with 192,000 homes purchased by first-time buyers.

Those who also want to remortgage and move to a bigger and better home may also benefit from this scheme, but only until 2021.

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Advantages Of The Help To Buy Housing Scheme

The Help to Buy house scheme was designed by the government for people who are struggling to buy a house in the UK, whether they are looking to move up the property ladder or purchase a newly built home.

The scheme works by bolstering the home buyers deposit, allowing them to take out a mortgage with only a 5 per cent deposit. Such a small deposit may not be acceptable when borrowing directly from a mortgage lender. Additionally, when borrowing on a smaller proportion of the house price, you may also receive a better rate.

If you are able to pay back the equity loan within the first five years, wherein any interest isn’t applicable, this scheme can also prove to be even more cost-effective.

Also, since the loan allows you to purchase houses up to the value of £600,000, you may find yourself able to afford a bigger and better home than if you had a smaller deposit. Another great benefit of this scheme is that, if your property value drops in the future you will pay less back, since the loan also relies on the percentage of your property’s value.

However, you must plan carefully before applying for a Help to Buy scheme. Consider the possibility that some things may not go exactly the way you planned them. For instance, if the price of the house increases in the future, this will mean that you will have to pay back more than you initially borrowed.

Make sure that you consider everything carefully and have fallback options before committing to buying through the Help to Buy scheme. Other available schemes like the Help to Buy house ISA and Mortgage Guarantee should also be factored into your consideration.

Paying Off Your Equity Loan

When you take out an equity loan in Wales or England, Help to Buy does not require you to pay it back unless you decide to sell your house. The equity loan is interest-free during the first five years, and interest payments will only be applicable after this period.

In the sixth year, the interest will be charged at 1.75 per cent and will increase every year based on the level of the Retail Prices Index (RPI), plus 1 per cent. Take note that the RPI changes each month.

Remortgage At A Higher Loan-To-Value (LTV)

Since the interest doesn’t come in to play until the sixth year, it is advisable to repay as much as possible in the first five years. You can also remortgage after the sixth year, but what is remortgaging exactly?

Basically, remortgaging means finding another mortgage lender to pay off your existing mortgage.But before you remortgage, you should consider your LTV, the ratio between the value of your loan and the value of your house in percentage. The remaining value is paid as a deposit.

Generally, if the LTV is high, it means there is more money being borrowed compared to the value of the property by someone who has less capital, making it a riskier investment on the part of the lender. Because of the added risk, a higher LTV will mean higher interest rates, and could increase your monthly repayments.

On the other hand, a lower LTV means less risk for both you and the lender, since you are borrowing less.

The best course of action depends largely on whether your home value increased after the first five years of the Help to Buy scheme. If the price of the property has gone up, it is likely that the LTV will be lower than before if you remortgage. This means you can remortgage and easily pay off the equity loan without significantly higher interest rates.

If the Help to Buy used houses price decreases, the LTV band will be higher, but you can still remortgage at a higher LTV if you want to. Some lenders may allow you to remortgage at a 95 per cent LTV, so you can borrow more and then pay back your equity loan. Doing so will also allow you to maximise the benefit from any future uplift in the house value.

Remortgage At A Higher Loan-To-Value (LTV)

Help to Buy offers the current equity loan scheme for both home movers and first-time home buyers until 31 March 2021. Those who want to qualify for the equity loan must legally complete the purchase of their desired property before the said date.

You can start looking for registered house builders with Help to Buy homes for sale on their developments. These house builders will allow you to reserve the property with a minimal fee of up to £500.

Once you have reserved the house, you can consult with a government Help to Buy house agent who will provide you with assistance during your equity loan application. They will also look into your financial situation and check if you can afford it.

You may get independent advice from a professional financial or mortgage advisor to help you find the right mortgage lender too. You may also talk to solicitors who will need to help you prepare the legal documents necessary in purchasing a house, and check your equity loan agreement.

If you want to get more information about the Help to Buy: Equity Loan application process, visit www.helptobuy.org.uk.

FREQUENTLY ASKED QUESTIONS

Can you get Help to Buy on any house?

The Help To Buy Equity Loan scheme is restricted to newly built homes only. If you use this property purchase plan, you will be required to raise a deposit that’s at least 5 per cent of the value of the property you wish to purchase.

What properties qualify for Help to Buy?

If you want to buy a new house, Help to Buy scheme has a few requirements:

  • You were able to raise a minimum of 5 per cent of the property’s value as a deposit.
  • The price of the house you are buying does not exceed £600,000.
  • You have secured at least an 80 per cent mortgage from the lender.

What happens after five years of Help to Buy?

If you have applied for a Help to Buy purchasing plan for homes, the loan will be interest-free for five years. After the fifth year, you will be required to pay 1.75 per cent of the value of your loan.

How many times my salary can I borrow for a mortgage?

Mortgage lenders usually lend up to four times your earnings, while some offer up to five to six times your salary. You should enquire directly with the lender as the amount offered varies depending on individual circumstances.

Is there a salary limit for Help to Buy?

The government have announced changes in the Help to Buy Equity Loan scheme due to the concerns over increasing house prices. New loans under this scheme should be less than 4.5 times the borrower’s income.

What happens to Help to Buy after 2021?

There are no changes to the current Help to Buy loan scheme, and it will still run until March 2021. The government will lend first-time buyers up to 20 per cent of the house price, and 40 per cent for those residing in London.

How do I repay Help to Buy?

Once it is time to pay back your Help to Buy equity loan, you will have three choices. You can remortgage, sell the house you bought with the Help to Buy scheme – and use the money you earn to pay it off – or pay off the loan using your savings.

Do you have to pay back Help to Buy?

Since the Help to Buy new houses scheme is interest-free for the first five years, it is advisable to repay as much as possible of the equity loan as possible before this period ends. Your repayments should be at least 10 per cent of the current house value on the market.

Can you pay back a Help to Buy loan within the first five years?

Yes, you can. You do not need to pay back the Equity Loan until the end of the mortgage term, which is a maximum of 25 years, or when you decide to sell the property you bought using Help to Buy, whichever happens sooner. However, many people want to pay back early on so that the interest does not stack after five years.

What happens if I sell my Help to Buy home?

If you decide to sell the house that you purchased with the Help to Buy scheme, not only will you have to pay back the loan from the government, but the rest of the mortgage, too. It’s also important to note that you must repay the value of the loan as a percentage of the house’s final sale price.

Help to Buy Changes In 2021

Currently, the Help to Buy scheme only works until the end of March 2021. After this period, the government will come up with a newly updated Help to Buy ISA scheme, which is expected to run until 2023.

One of the expected changes to the 2021 Help to Buy scheme is the regional price capping. From 2021 onwards, the prices of newly-built homes will change according to your region.

The maximum amount for buyers who want to purchase houses in London will be the same: £600,000. However, the Help to Buy house price limit in several regions will vary. Here is a list of some of the regions and their price capping:

North East
£186,100
West Midlands
£225,600
East of England
£407,400
North West
£224,400
East Midlands
£261,900
South East
£437,600
Yorkshire and the Humber
£228,100
South West
£349,000
London
£600,000

Moreover, the new lending plan for home purchases will only be available to first-time buyers. So, if you’ve owned a home before but want to benefit from the Help to Buy scheme, you should do so before 2021.

Help To Buy: Mortgage Guarantee Scheme

The Help to Buy scheme has two main elements: the equity loan and the Mortgage Guarantee scheme. These schemes serve as home purchase assistance for those who have troubles buying their homes.

If you have a small deposit, you can use this Mortgage Guarantee scheme if you want to have a better chance of getting a mortgage. It is applicable for first-time buyers and home movers who want to move to a house with a higher value.

Under this scheme, you only need a deposit equivalent to 5 per cent of the house value. The government help to buy a house scheme guarantees your mortgage lender up to 15 per cent of the house value. Because of this, banks and building societies can lend larger mortgages at lower rates.

The Mortgage Guarantee Scheme ended on 31 December 2016, but for now homebuyers can still make good use of the Help to Buy Equity Loan and Help to Buy Shared Ownership houses schemes.

Help to Buy Mortgage: Find Out If You Are Eligible

Before you apply for a Help to Buy Mortgage, remember that you will be subjected to stress tests and credit checks, and you will have to work with a mortgage lender who operates differently from others and may have their own terms when it comes to the borrower’s eligibility.

Below are some requirements that should be met if you want government assistance in purchasing properties:

  • The price of the house should not exceed £600,000.
  • You have a clean credit history that proves you are capable of repayments. If you have county court judgements registered against you up to three years prior to your application, you will not be eligible for the mortgage.
  • The scheme is only available in England. For overseas buyers who want UK houses for sale, Help to Buy requires them to have a history of UK home ownership, or you will not be able to apply for the scheme.
  • You can’t use the Help to Buy scheme with other government home-ownership schemes, like NewBuy.

If you want more professional advice about the Help to Buy scheme, contact one of our professionals today!

Get Expert Help To Buy Mortgage Advice

All firms are regulated by the Solicitors Regulation Authority or the Council for Licensed Help To Buy