There are two versions of the Help to Buy scheme: Equity and Guarantee mortgages.
Equity: Help to Buy is a Government scheme to help people buy their first home or a bigger home. It is only available on a single property, where that property is the only one owned by the individual; i.e. you cannot use it to buy a second home or buy-to-let property. The dwelling must also cost less than £600k. You put down a minimum deposit of 5% and get an equity loan from the Government of 20% and a mortgage for 75% from a normal lender. The equity loan from the Government is interest free for the first 5 years (after that, interest is payable). On the sale of the property, you need to pay back 20% of the sale price to the Government.
Guarantee: This is a type of mortgage provided by some lenders, through which they will accept a deposit of 5% (rather than the more usual 25%). The lenders get a guarantee from the Government covering the difference between the standard deposit and the 5% put in by you. The borrower pays the mortgage to the lender and there is no requirement to repay the Government – in essence, it is a normal mortgage with a lower deposit.
What is a Deposit?
This is the money that you pay up front towards the purchase of the house. Your lender will require a minimum deposit – an amount that varies between different lenders and types of mortgage. Typically, the minimum deposit will be between 5% and 25% of the purchase price.
What is APR?
This stands for “Annual Percentage Rate”. It includes any fees and charges, as well as any fixed-rate periods and variable rates, and then gives an annual average for these costs, spread over the whole term of the mortgage. The idea is that it gives you a flavour of what your mortgage will cost you. The APR assumes that you will keep the mortgage for the full term and that the variable rate will remain constant – i.e. that mortgage rates will not fall or rise in the future (which may affect actual costs).
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Our initial mortgage consultation is free. We will charge an application fee of £395 to process your mortgage.