The government have taken various steps to ensure first time buyers were able to get on the housing ladder – all of which under the label of the Help To Buy Scheme. The main goal was to make deposits and the initial cost of buying more affordable, through equity loan, 5% mortgages or mortgage guarantee.
The first phase of Help To Buy applied to new build properties for the first time buyers only providing an equity loan. The second version or “Phase 2″ (mortgage guarantee) used to be available to all types of properties and buyers, up to a maximum price of £600,000.
In 2016 the mortgage guarantee scheme has since ended, meaning that applicants can no longer have their loan guaranteed by the government. However, this does not mean that those looking for a 5% mortgage (a LTV of 95%) are out of options. There are many lenders who may be able to provide high LTV mortgages enabling first time buyers and those with a lower deposit to get on the housing ladder.
Are there any risks?
In common with any mortgage borrowing, the main risk is that of rising interest rates. In addition borrowers who apply for a 95% mortgage will have minimal equity initially and will be exposed to a negative equity position in the event of property prices falling.
Do you need to use Help To Buy if you have a larger deposit?
The initial interest rate indications suggest that if you have a larger deposit, it may be better to avoid Help To Buy. We can look at your specific circumstances and advise accordingly.
For more details on Help To Buy or any other type of enquiry, please call one of our offices.