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Help to Buy Explained – FAQ’s

The newly announced Help To Buy housing scheme package will offer huge financial support to new buyers and many families and help fix the problems faced by the housing market stagnation. The two schemes should be a real boost and helping hand to help people move up the property ladder.Let us look at the main points of the scheme.

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I don’t know what Help to Buy is. Can you help explain?

The first part of the scheme is a shared home equity loan of up to twenty percent of the properties value of a newly built property and the other part is a mortgage guarantee scheme coming into effect in 2014, whereby mortgage companies will be offered incentives to help people buy using lower deposits.

What was the reason the Government Set up this Help To Buy?

An “aspirational nation” is one that has ownership and the government wants to help people with this.Its is hoped that Help To Buy will increase supply of both new housing  and low deposit funding for mortgages.

What is the Criteria?

Lets say you have a 5% deposit then you may buy a new build home with a help of a home equity loan government scheme from April 2013,meaning that your mortgage will be lower as a result of the extra government loan.The second stage of the help to buy offer is a mortgage guarantee which comes into effect from January 2014.

Can I get a mortgage without a deposit?

No unfortunately 100% mortgages are not being offered you must have a 5% deposit to be eligible.Does everyone get a mortgage on this scheme? This is not a new scheme to encourage irresponsible lending which led to the property market collapse in 2008 but rather a way for people who can afford the lenders repayments but cannot raise the deposit. The applicant must also pass the credit scoring and other checks before a mortgage is granted.What is the  maximum I can lend?

Providing the applicant can manage the repayments and is eligible to a mortgage then with the assistance of Help to Buy they will be able to purchase a home to the value of six hundred thousand pounds.

Is this scheme open to existing home owners?

Absolutely yes! The two schemes can be used by new buyers as well as people moving up the property ladder providing they meet the lending criteria.

Are interest only mortgages compatible with Help To Buy?

No, it is  only available to capital repayments mortgage.

Can I use a landlord mortgage with Help to Buy?

No it is for home owners not landlords, the idea is to increase home ownership, not expand the rental market.

How can I get these schemes?

The home equity loan starts from 01/04/2013. The participating householders will help individuals via HomeBuy agents.

The second part is a mortgage guarantee which is effective from Jan 2014, with full details being released closer to launch.

Can you get mortgage through a limited company with Help to Buy?

No only householders not corporations can use this financing method.

Can n use this financing method.

Can I still get a  NewBuy mortgage loan?

Yes. This older scheme whilst it does not help as many people as the newer shame does, it will remain available to house buyers.

What is the Help to Buy: equity loan scheme all about?

Simply put is is a loan up to 20% of the properties value provided by the government on new build homes, providing the borrower can raise 5% of the mortgage.This equity loan offered also has the added benefit of being interest free for five years. After this time  frame the interest rate fee of 1.75% becomes payable on the loan which will also rise in accordance of the RPI (Retail Price Index) plus 1%.

When is the equity loan pay back due date?

Any time within 25 years or terms of the mortgage or on the mortgage or on the sale of the house or on the sale of the house.Is the equity loan available on non new build homes?

The help to buy equity loan is aimed for new build houses.In 2014, buyers will be able to buy older properties with the help to buy mortgage guarantee.

What is the Help To Buy mortgage guarantee?

The plan is to make available some £12bn in guarantees to mortgage lenders that should be enough to fund £130 billion of high LTV ( loan to value)  mortgages.The whole idea of the scheme is to increase availability of mortgages for buyers with a low deposit.How does this scheme work?

The lender will be offered the opportunity to buy the guarantee of the high loan to value portion of a mortgage. It is hoped that this guarantee will encourage lenders to fund more mortgage applications to home buyers using lower deposits.

When will I be able to take advantage of advantage of mortgage guarantee?

Starting in January 2014.

Will the Government guarantee mortgage repayments?

No!The  mortgage guarantee Help to Buy offer will provide guarantees to mortgage companies on a portion of the mortgage. This means that if the borrower falls behind and defaults on payments and the home is eventually repossessed then the government will cover a portion of the losses the lender would normally incur, so its a very safe bet for the lender.

What type of homes can I buy under this scheme?

Any residential properties within the UK, up to £600,000.I have a deposit which is larger than 20%  will I still be able to get a guaranteed mortgage?

The mortgage guarantee provided by help to buy will only be available to buyers with deposits between 5% & 20%.If you have a larger than 20% deposit available then there are many products on the market to help you. Much of the property boom was financed by 95% mortgages but in today’s economic climate where money is tight people are struggling to raise the 25% required by most lenders.

Help to Buy guarantee mortgages will not be available until January 2014.

News and reaction to the scheme >>..

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