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| Help to Buy scheme: how it will work | Help to Buy scheme: how it will work |
| (about 2 hours later) | |
| One of the big surprises of the budget was the chancellor's announcement of a new homebuying scheme called Help to Buy. | One of the big surprises of the budget was the chancellor's announcement of a new homebuying scheme called Help to Buy. |
| How will it work? | How will it work? |
| Help to Buy is taking two forms: one part offers buyers the opportunity to take an interest-free loan from the government; the other sees the government acting as guarantor for some of a borrower's debt. Both will be available for homes worth up to £600,000, and there will be no cap on how much you can earn to qualify. | Help to Buy is taking two forms: one part offers buyers the opportunity to take an interest-free loan from the government; the other sees the government acting as guarantor for some of a borrower's debt. Both will be available for homes worth up to £600,000, and there will be no cap on how much you can earn to qualify. |
| How will the loan scheme work? | How will the loan scheme work? |
| The "equity loan" part will start on 1 April 2013 and will help people who want to buy a new-build property. It is similar to the existing First Buy scheme, but available to existing homeowners as well as first-time buyers. Borrowers will need to raise a deposit of 5% of the value of the property they want to buy, but can borrow a further 20% on an interest-free basis. The biggest loan available will be £120,000. | The "equity loan" part will start on 1 April 2013 and will help people who want to buy a new-build property. It is similar to the existing First Buy scheme, but available to existing homeowners as well as first-time buyers. Borrowers will need to raise a deposit of 5% of the value of the property they want to buy, but can borrow a further 20% on an interest-free basis. The biggest loan available will be £120,000. |
| The loan, which will be provided by the government, must be repaid when the property is eventually sold. It can be repaid earlier, but only if the mortgage is paid off at the time. After five years it will attract a fee of 1.75%, which will rise annually by RPI inflation plus 1%. | |
| The Treasury says the £3.5bn scheme will help up to 74,000 buyers. Anyone who is interested in using it needs to contact a participating house builder or HomeBuy. | The Treasury says the £3.5bn scheme will help up to 74,000 buyers. Anyone who is interested in using it needs to contact a participating house builder or HomeBuy. |
| How will the guarantee scheme work? | How will the guarantee scheme work? |
| This part of the scheme, which will be available from January 2014, will help you buy either a new or existing property. Again, you will need to be able to raise a deposit of at least 5%, and this time you will need a deposit of less than 20% (if you have a bigger deposit, you should have a good choice of mortgages anyway). The government will provide the lender with a guarantee for a portion of your loan, allowing it to offer a mortgage even though you have a small deposit. More details will be announced later in the year. | This part of the scheme, which will be available from January 2014, will help you buy either a new or existing property. Again, you will need to be able to raise a deposit of at least 5%, and this time you will need a deposit of less than 20% (if you have a bigger deposit, you should have a good choice of mortgages anyway). The government will provide the lender with a guarantee for a portion of your loan, allowing it to offer a mortgage even though you have a small deposit. More details will be announced later in the year. |
| Who will it help? | Who will it help? |
| The schemes will both be available to new buyers and those who own homes already, but not people buying property to let. The aim is to help both first-time buyers and those stuck on the housing ladder. Because you will need a deposit of at least 5% they will not help if you are in negative equity. The mortgage guarantee scheme could be useful to people who are trying to sell, as it will help buyers purchase existing homes – other schemes have tended to focus on new-build properties. | The schemes will both be available to new buyers and those who own homes already, but not people buying property to let. The aim is to help both first-time buyers and those stuck on the housing ladder. Because you will need a deposit of at least 5% they will not help if you are in negative equity. The mortgage guarantee scheme could be useful to people who are trying to sell, as it will help buyers purchase existing homes – other schemes have tended to focus on new-build properties. |
| Does it mean I can get a mortgage? | Does it mean I can get a mortgage? |
| If the only thing standing between you and a mortgage is a lack of deposit, then it should do. If you have other issues – a poor credit history or you are recently self-employed, for example – then no it won't help. Lenders will still be able to choose who they are willing to lend to. | If the only thing standing between you and a mortgage is a lack of deposit, then it should do. If you have other issues – a poor credit history or you are recently self-employed, for example – then no it won't help. Lenders will still be able to choose who they are willing to lend to. |