Top tips for those considering Help to Buy

The government-backed Help to Buy scheme has been designed to help people purchase a new property with just a five per cent deposit.

This is great news for both first-time buyers and for those looking to move up the property ladder but who lack the funds for the higher deposits that many lenders have been asking for.

The government’s Help to Buy website explains everything you need to know about the scheme, but here are our top tips for ensuring Help to Buy is the right option for you.

Understand the different parts of the scheme: The scheme has two parts – an equity loan for those looking to buy a brand new property and a mortgage guarantee which applies to new and existing homes worth up to £600,000. With the equity loan the government lends you up to 20% of the cost of your new-build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. A mortgage supported by the mortgage guarantee scheme works in exactly the same way as any other mortgage except that under the scheme the government offers lenders the option to purchase a guarantee on mortgage loans. Because of this support, lenders taking part are able to offer home buyers more high-loan-to-value mortgages (80-95%).

Make sure you can still afford the repayments: While getting help to afford a deposit on your next home is good news, you will still be fully responsible for your mortgage repayments. So if you have a 5% deposit, you will need to take out and pay back a 95% mortgage. The higher the LTV value, the higher your monthly repayments will be, so bear this in mind. All the usual lender eligibility checks will still apply.

Don’t leave it too late to take advantage of the scheme: The Bank of England has expressed concern that Help to Buy could lead to another housing bubble by overheating the market and is watching developments closely. The Government has said it will intervene if there is a risk of this happening, which means Help to Buy isn’t going to last forever. Assess your various options for moving home and decide if now is the right time to move.

Speak to your local Help to Buy agent to find out more: All regions have been assigned a dedicated Help to Buy agent to guide them through the buying process. These details can be found through the Help to Buy website.

For more information on this matter, or any other property law matter, please contact Karen Piontek on 01772 258321 or Karen.Piontek@harrison-drury.com