Help To Buy – Your Questions Answered
The Government’s decision to bring forward the Mortgage Guarantee element of Help To Buy has left a lot of buyers and would-be purchasers with questions. To help you understand the benefits of the initiative – which is one of the best developments in the property industry for some years – we’ve compiled a handy question and answer blog.
Q. What is the Mortgage Guarantee part of Help to Buy?
A. The Help To Buy Mortgage Guarantee element means a buyer only has to raise a 5% deposit. The Government and the bank then jointly guarantees up to the next 15% of the property’s value, in return for a fee paid for by the lender.
Q. Who qualifies for the Help To Buy Mortgage Guarantee?
A. The new Mortgage Guarantee element of Help To Buy is open to all home movers, whether they are first timers, moving up the property ladder, buying a new build orbuying a resale property.
Q. How will the Help To Buy Mortgage Guarantee affect getting a mortgage?
A. We will see a return of the 95% mortgage but without the risk and volatility. The Government’s guarantee of 15% of a deposit will appease lenders who have been wary of lending to people with low deposits. The guarantee acts as a safeguard and paves the way for people with a 5% deposit to borrow money again.
An additional upside is mortgage lenders will hopefully reduce rates on standard mortgages outside of the Help To Buy scheme as there is a new element of competition.
Q. Are there any conditions linked to Help To Buy?
A. To qualify for the Help To Buy Mortgage Guarantee scheme the purchase price must be under £600,000; the property must be the only home the buyer owns and the property being purchased should be their primary residence and not let out.
Q. Which lenders are involved in the Help To Buy Mortgage Guarantee scheme?
The Halifax and NatWest are the first lenders to declare they are part of the scheme, although a number of other high street banks are due to join the initiative over the coming weeks. Jones Robinson is working closely with independent mortgage advisorFirstXtra, and will update the blog with rates of interest and any new lenders who join the initiative.
Q. When can I apply for a Help To Buy mortgage?
A. Anyone thinking of moving home should be aware that while lenders can begin writing loans under the new scheme from 7th October, the money will only come through in January 2014, meaning all completions will be from the New Year.
Q. Will the Help To Buy Mortgage Guarantee scheme cause a housing bubble?
A. The Government is acutely aware that the new initiative might cause a rush for property so they have asked the Bank of England to monitor the impact of Help To Buy on an annual basis, even though the initiative is due to run until 2017. That means the scheme could be stopped if an unsustainable trend emerges.
In addition, mortgage ‘stress tests’ will be used to ensure the purchasers can afford the mortgage repayments and anyone with historical difficulties relating to debt repayment maybe refused participation.
Q. Isn’t there another part to Help To Buy?
A. Yes, there is also the Government’s Help To Buy Equity Loan scheme. This applies to all buyers of brand new homes (not resale). A purchaser puts forward a 5% deposit and the Government loans the buyer a 20% deposit. The remaining 75% of the purchase price must be funded by a mortgage, and the Government loan will need to be paid back. The same restrictions apply to the Equity Loan initiative.
You can book an appointment with the Jones Robinson team and by contacting your local branch. We’ll help you fully understand Help To Buy and try and match you with more of the exciting new mortgage deals available under the initiative.
Related article: Help to Buy – The basics – New Buy equity loan v Mortgage guarantee
Bio: Charles Robinson has been working in the property industry for 25 years, with new homes, land, sales and appraisals his areas of expertise.