United Kingdom Help-to-buy scheme

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United Kingdom Help-to-buy scheme
A mortgage supported by the Help to Buy scheme works in the same manner as any other mortgage except that under the scheme, the Government offers loan companies the choice to buy a guarantee on mortgage loans.
Because of this support, loan companies taking part can offer home buyers more high-loan-to-value mortgage loans (up to 95%). Therefore, if a buyer pays a 5% down payment then they will need to take out and pay back a 95% mortgage. The buyer will be fully responsible for their home loan repayments.



The Mortgage Guarantee scheme can only be used for home you intend to occupy, and must be your only home. Nor is it just for first time buyers. Within certain parameters, any buyer can benefit as long as it is a residential repayment mortgage and not a buy-to-let.
If a buyer can afford to contribute more in the way of a deposit then the improved lending environment should mean more competitive rates for those with a 10% to 20% down payment. For all those with 5% down payment this government underwritten scheme is the only real option.
There is a popular misconception that the scheme is for new build homes solely. This isn't the case. There is a further scheme designed to help individuals and families to buy new build houses (called the Equity Loan scheme). This works similarly but is for new-build properties solely. The Mortgage Guarantee phase of Help to Buy is available across the UK. The equity loan phase of Help to Buy is available in England and is for new-build homes solely up to £600,000. Scotland has just launched a new build-only Equity Loan scheme called Help to Buy (Scotland), for homes up to £400,000.
There's a worry that the Help to Buy scheme is creating an over-buoyant marketplace and leading to false price inflation. Over stimulating the marketplace could lead to house prices increasing sharply and indeed in some areas of the country prices have taken a sharp rise, but it is vital to keep in mind that property prices do go up and down depending on numerous factors. It is also worth remembering that house prices are nevertheless lower these days in some parts of the country compared to six years ago. This is part influenced by the difficulty that buyers have experienced in obtaining mortgages since the start of the global financial crisis. The scheme was not designed to run forever, in fact it is only scheduled to last for 3 years. It started as a method to make home buying more accessible to more people. At the end of this period the hope is that the mortgage marketplace and the economy more generally should be in a better place than at the start.