Help to Buy Mortgage
Help to Buy is a Government scheme to help first-time home buyers get a mortgage with a small deposit. There are two types of Help to Buy mortgage schemes:Help to Buy Shared Ownership (or Shared Equity)
Help to Buy Equity Loan
How does a Help to Buy Shared Ownership Scheme work?
If you are a first-time buyer struggling to afford a mortgage on 100% of a home, the Help to Buy Shared Ownership (sometime called shared equity) scheme provides the opportunity to buy a 25% - 75% share of a home, and pay rent on the remaining share. A smaller shared ownership or shared equity mortgage will require a smaller deposit which may make your dream of home ownership a reality. You can increase your ownership share later when your circumstances allow.
The Help to Buy Shared Ownership scheme is available for new build homes or an existing property for sale through a housing association. Shared ownership properties are always leasehold.
To qualify for the Help to Buy Shared Ownership scheme in Carlisle and Cumbria you must be a first-time buyer, you’ve previously owned a home but can’t afford to buy one now or are an existing shared owner looking to move house. Your household must earn less than £80,000 a year (or £90,000 or less in London).
Older People’s Shared Ownership Scheme
If you are 55 years old or over, this scheme works like the Help to Buy Shared Ownership Scheme but you can only buy up to 75% of your home. When you do own 75% of your home, however, you do not have to pay rent on the remaining 25% share.
Your home may be repossessed if you do not keep up repayments on your mortgage.
How does a Help to Buy Equity Loan work?
A Help to Buy Equity Loan comes from the Government and applies to anyone buying a new build house. The Government will lend you up to 20% (40% if you’re in London) of the cost of your home. You will be required to pay a deposit of at least 5% and hold a mortgage of 25% or more for the remaining costs.
You will be required to repay the loan later, but you won’t be charged interest on it for the first five years.
If you're aged 18 – 40, you can save into a Lifetime ISA to help you buy your first home and save for your future.
You can save £4,000 a year into your Lifetime ISA until you're 50 and the government adds a 25% bonus to the money you save, up to a maximum of £1,000 annually.
Frequently Asked Questions
A help-to-buy mortgage is part of a scheme announced by the UK government to assist first-time buyers. Those looking to buy their first property can borrow up to 20% of the purchase price (40% in London) from the scheme, which is interest-free for five years. The minimum deposit is 5%, mortgage finance from 75% (from 55% in London) with the balance provided by the help-to-buy scheme.
The way in which a help-to-buy mortgage works is similar to a third-party investment. If you borrow the maximum 20% from the government, this equates to a 20% share in your home. The loan is repaid after 25 years, or before, if the property is sold, with the government receiving the appropriate share of proceeds/value of the property.
The funds are provided interest-free for the first five years. If the loan is not repaid within five years, interest will be charged at a rate of 1.75%. This rate will increase year-on-year by the consumer price index +2% until repaid in full. The amount of loan outstanding is directly related to the value of your property. If your house increases in value, so does the loan, if your house was to fall in value, the level of capital outstanding will follow suit.
The current help-to-buy mortgage scheme is set to close to new applicants at 6pm on 31 October 2022. Details may differ slightly across different parts of the UK therefore it is important to take advice. While there is no indication that the scheme will be extended or a new scheme announced, there may be further details in the November budget.
The scheme is focused wholly on first-time buyers. Those who have owned a home/residential property in the UK or abroad or had any form of sharia mortgage finance are not eligible. The property must be a new build, sold by a registered help-to-buy housebuilder and the only home that you own and live in. If the property has been lived in by anybody else, it will be ineligible for the scheme.
There are regional maximum property purchase limits ranging from £186,100 in the North-East of England up to £600,000 in London. The help-to-buy mortgage is one of many schemes used by the UK government over the years to support first-time buyers.
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Why work with us?
At Stan Sherlock Associates, arranging a mortgage is not a one-off transaction. We aim to build long term relationships with our clients and provide you with an advice service over the lifetime of your current mortgage, and beyond, which ensures you always have the right deal for your situation.
Although based in Carlisle, our clients come from much further afield. We regularly work with clients from across Cumbria (including Kendal, Keswick, Penrith, Whitehaven and everywhere in between), the Scottish Borders and North East England. Many of our mortgage advice services can be provided by phone and email but our mortgage advisers are always happy to meet you face to face.