Help To Buy Scheme – A Closer Look
What Is The Help To Buy Scheme?
Are you struggling to afford the cost of purchasing a home? If so, then you might want to consider the Help to Buy scheme that is available right now.
The Help to Buy scheme is a government scheme that was first established in 2013. It provides first-time buyers and existing homeowners a loan to buy a property that has been newly built. The property can’t have a value of more than £600,000.
Through this scheme, you will be able to borrow 20% of the purchase price of the home without interest for the first five years. All you need is a 5% deposit. If you live in London, then it’s possible to borrow 40% through this scheme.
The rest of the value of the home is borrowed from a traditional mortgage lender through a repayment basis. This can cover as much as 75% of the property value or up to 60% if you live in London.
The equity loan will be paid back within 25 years or earlier if you choose to sell the property. If you sell, then you’ll need to pay the same percentage of the purchase price as the previous equity loan. If you borrowed 20%, you’ll need to repay 20% of the sale.
How Can It Assist You?
The overall aim of the Help to Buy Scheme is really in the name. It’s designed to ensure that buyers can get the home they want easier than before. It also limits the need to get a larger and potentially, unaffordable mortgage and instead allows you to borrow as little as possible from the mortgage lender.
It also allows people who can only save a smaller deposit of 5% the opportunity to buy a property without needing to worry about ending up with an expensive mortgage.
Essentially, you could buy a home worth £300,000, you would need a deposit of £15,000. The equity loan would cover a further £60,000 while the mortgage would be £225,000.
What Are The Benefits?
There are lots of benefits to this scheme that you should consider. You will almost certainly be able to buy a property sooner which helps you stop renting and wasting money. That’s due to the fact that you will be able to buy with a smaller deposit.
The equity loan is also interest free for the first five year so you don’t need to worry about the cost rising immediately. In the sixth year, you will currently be charged a rate of 1.75%.
After the initial five years, you’ll be able to gain access to a highly competitive loan rate and access to the cheapest mortgage rates on the market.
Through the scheme, the government provides a guarantee on the mortgage for a further 15%. The aim here is to ensure that lenders have the peace of mind to offer buyers lower rates on larger mortgages. As such, you could purchase a more expensive home that you otherwise wouldn’t be able to afford.
We hope this helps you understand the benefits of the help to buy scheme and how using it could ensure you get a great property at a great price. All of our houses for sale can be purchased with support from the help to buy scheme – to learn more, please feel free to contact a member of our sales team.
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