It can sometimes seem as though you’ll never get onto the property ladder as saving a deposit can be tough. There are so many types of mortgage and it’s such a thorough process that it can put first time buyers off taking the plunge.
Luckily there are some great schemes that are designed purely to help people get onto the property ladder. In recent years the government has launched several Help to Buy schemes that give new buyers boosts and incentives to buy their own home.
In this guide we’ve gathered these schemes and will take you through each one so that you can make a well-informed decision when you come to get your own mortgage.
Your dedicated Mortgage Buddy is also here to help you through the whole mortgage process. If you tell us a little about what you’re looking for, we can match you with an adviser that will search thousands of mortgages to find the right one for your situation.Find your buddy
What is Help to Buy?
The term ‘help to buy’ refers to a selection of schemes launched by the UK government that are designed to help buyers, and particularly first time buyers, onto the property ladder.
What is a Help to Buy Equity Loan?
Through the Help to Buy Equity Loan, the government can lend you 20% of the purchase price of a property you’d like to buy. You need to provide just a 5% deposit, and then the remaining 75% makes up what’s left to pay on your mortgage.
If you’re lucky enough to have more than 5% saved for a deposit then you’re more than welcome to put that in too. It’ll simply reduce the 75% amount down to however much is left to pay.
One of the great features of the Help to Buy Equity Loan is that you don’t pay any interest for the first five years on that 20% the government provided. After the first five years of your mortgage term have elapsed you’ll then pay a fixed fee of 1.75% which rises each year in line with inflation.
If you’re trying to buy a property in the Greater London area, the government’s equity loan rises to 40%.
There will be a new Help to Buy scheme introduced by the government in April 2021. That scheme will be restricted to first time buyers and will include more regional price caps. However, until the new scheme launches, there will be no changes to the current Help to Buy Equity Loan scheme.
Can I use the Help to Buy Equity Loan on any property?
Unfortunately not. You can only use the Help to Buy Equity Loan on new build properties. And you can use an Equity Loan on properties valued up to £250,000 (£450,000 in London).
How can I get a Help to Buy Equity Loan?
You should be eligible for a Help to Buy Equity Loan if you fulfil these criteria:
- You’re buying a new build property
- The property’s value doesn’t exceed £250,000 (or £450,000 in London)
- You must buy the property from a registered Help to Buy builder or developer
- This is the only property you own/are planning to own
- If you’re actually going to live there – not sub-let or rent it out
- If you pass the necessary affordability checks.
That final point is worth bearing in mind. Getting a mortgage with the aid of a Help to Buy Equity Loan is essentially the same as getting a standard mortgage – you have to go through the same affordability checking process. The lender still needs to make sure you can realistically afford to take out this mortgage.
The Help to Buy Equity Loan scheme is currently only available in England. The governments of Scotland, Wales and Northern Ireland have their own similar schemes.
If you’re interested in a Help to Buy Equity Loan for your mortgage or would like any more information, get in touch with us and get your own dedicated Mortgage Buddy.
What is a Help to Buy ISA?
A Help to Buy ISA is a type of savings account that’s designed to help you build up a deposit for your first property.
How does a Help to Buy ISA work?
With a Help to Buy ISA you put in up to £200 per month and the government will boost what you’ve saved by adding an extra 25% up to a maximum of £3,000.
When you’re ready to buy your first home your solicitor will apply for your government bonus. It’s important to point out that you don’t actually get that bonus paid into your Help to Buy ISA – the government simply releases the funds when you’re ready to buy your first property.
A great feature of the Help to Buy ISA is that if you’re planning to buy a property with your partner or someone else, you can both use your Help to Buy ISA government bonus. So if you and your partner both have a Help to Buy ISA and you both reach the maximum amount, you’ll have an extra £6,000 to put towards your deposit.
The deadline for setting up a Help to Buy ISA was 30 November 2019, so if you haven’t already set one up you won’t be able to any more.
If you have already set up your own Help to Buy ISA, you’ll still be able to save and get your government bonus.
Am I eligible for a Help to Buy ISA?
If you opened a Help to Buy ISA before the deadline you’ll be eligible for the 25% government bonus if you:
- Are living in the UK
- Plan to buy a property worth up to £250,000 (or up to £450,000 in London)
- Will only own this one property
- You will actually live in this property
- You’ll take out a mortgage to buy the property.
You can use the funds from your Help to Buy ISA with other government home ownership schemes, including the Help to Buy Equity Loan and the Shared Ownership scheme.
How can I get a Help to Buy ISA?
You can no longer set up a new Help to Buy ISA. The deadline to set up a new account was 30 November 2019.
What are the alternatives to a Help to Buy ISA?
There is a very similar scheme to the Help to Buy ISA which does more or less the same thing. It’s called a Lifetime ISA. The crucial point about the Lifetime ISA is that there is no deadline to apply, unlike the Help to Buy ISA’s deadline which has already passed.
With a Lifetime ISA you can put in up to £4,000 each year and the government will add an additional 25% bonus up to a maximum of £1,000 per year.
To open a Lifetime ISA you must be between the ages of 18 and 40. And you can use the funds from your Lifetime ISA to buy your first home or to save for later in life.
An important difference between a Lifetime ISA and a Help to Buy ISA is that you can use a Lifetime ISA on a property worth up to £450,000, no matter where in the UK you’re buying.
You can also combine your Lifetime ISA fund with your partner or another person’s when you apply for your first mortgage, just like the Help to Buy ISA.
What is Help to Buy Shared Ownership?
Help to Buy Shared Ownership is a government scheme through which you can buy a share of your first property. You can purchase between 25-75% of the whole property’s value with a mortgage and then pay rent on the outstanding percentage.
What’s great about the Help to Buy Shared Ownership scheme is that you can buy a larger share of the property when you’ve saved enough to do so. Doing this will of course reduce the rent you pay on the outstanding amount to whatever percentage is left to pay.
How can I get a Help to Buy Shared Ownership mortgage?
There are a few criteria you’ll need to fit into if you’re interested in applying for a Help to Buy Shared Ownership mortgage:
- As a household you should earn no more than £80,000 a year (or £90,000 if you’re buying in London).
- You should be a first time buyer; you used to own your home but now can’t afford to; or you’re an existing shared owner looking to move to a new place.
- You can either buy a new build property or an existing one that’s available through housing association resale programmes.
- You must plan to live in the property yourself and not rent it out.
- You should be at least 18 years old and have the permanent right to live in the UK.
Military personnel can be given priority through this scheme to get a Help to Buy Shared Ownership mortgage.
If you’re over 55 years old you could also get your Help to Buy Shared Ownership property through the Older People’s Shared Ownership Scheme. What’s different about the Older People’s Shared Ownership Scheme is that you can only own a maximum of 75% of the property. Once you do reach that 75% ownership point however, you don’t have to pay rent on the outstanding 25% of the property.
For more information on the Help to Buy Shared Ownership scheme and to find out how you can get a mortgage through the scheme, get in touch with Mortgage Buddy today. Our Buddies are experts in all things mortgages and can help you find the right mortgage for your situation from across the market.
What is the Help to Buy Mortgage Guarantee scheme?
The Help to Buy Mortgage Guarantee scheme was introduced by the government in 2013 and was meant to help first time buyers with a small deposit get the mortgage they needed. The Mortgage Guarantee scheme applied to new build properties as well as existing properties and the scheme was eligible for properties valued up to £600,000.
Through the Help to Buy Mortgage Guarantee scheme, you’d only need to provide a 5% deposit on the property you wanted to buy. The government would then provide 15% to make sure the lender had the assurance that they could lend to you.
You wouldn’t be able to use the Help to Buy Mortgage Guarantee scheme alongside any of the other Help to Buy schemes. The Help to Buy Mortgage Guarantee scheme ended on December 31 2016 so if you didn’t get your mortgage through the scheme before that date, you won’t be able to any more.
Can I get a Help to Buy mortgage with bad credit?
There is one feature shared by all of the Help to Buy schemes we’ve talked about here. This is that even though they are all great schemes that give many first time buyers the boost they need to get onto the housing ladder, you will need to go through all of the regular affordability checks before you get accepted for your mortgage.
One thing is for certain: getting your shared ownership or Help to Buy mortgage with bad credit through any of these schemes will be a lot harder than if you had a clean credit file. But don’t despair! Even with a poor or not completely clean credit file you still have a good chance of getting the mortgage you want.
Mortgage Buddy exists to help people like you who simply want to get their foot onto the elusive housing ladder and get a help to buy mortgage even with bad credit. We are the experts in mortgages from across the market.
There are literally thousands of single and shared ownership mortgages provided by lenders out there and navigating them all would be impossible on your own, especially as a first time buyer looking to get a help to buy mortgage with bad credit.
By submitting a few details to us about what kind of mortgage you’re looking for, we’ll search the market for the help to buy mortgage that’s right for you. Click for more information on getting a mortgage with bad credit or a CCJ.
We’ll get you the mortgage you deserve, on your terms. Get in touch today.