Help to Buy Mortgage Advice - Penda Financial
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What can you do when you are unable to satisfy the lending criteria or provide a deposit above 5%?
Maybe the Help to Buy Scheme is an option worthy of consideration.
What is the Help to Buy Mortgage Scheme
Help to Buy is a government-backed scheme to enable people with limited funds to purchase a new-build property and get on the property ladder.
The scheme is currently open for
first-time buyers in Tyneside looking to purchase a home and existing homeowners who are finding it difficult to buy a bigger property. From April 2021, the scheme will only be available to first-time buyers.
How the Help to Buy Scheme Works
The scheme is only available for buying new-build properties.
You should be eligible for the scheme if you can satisfy the lending criteria and can afford to put down a 5% deposit.
The government will provide you with finance for 20% of the property price, interest-free for the first five years.
So for the initial five years, you will finance a mortgage for only 75% of the property price.
After the five years have elapsed, the interest rate for the repayment rates will initially be 1.75% per annum.
You can repay the government loan at any time within the agreed mortgage term, typically 25-35 years.
If you sell the property before the government loan is paid off, you need to repay the remainder of the 20% loan, plus a proportion of the growth in the value of the property.
Currently, there is no upper cap on the maximum income, meaning even high earners can take advantage of the scheme. To be eligible, however, the property you are purchasing must cost less than £600,000.
You can only own one home if you apply for the scheme, so if you use this scheme, you must live in the property and not own any others. The scheme is not for buying a buy-to-let property.
The property purchase has to be from a builder who has registered for the scheme.
The mortgage type has to be a capital and repayment loan, as the equity loan scheme does not allow interest-only deals.
If you want to find out more about the Help to Buy Equity Loan scheme
click here .
Help to Buy mortgage lenders
You then need to apply for the 20% government equity loan, and if your application is approved, you can add this to your 5% deposit and apply for a mortgage for the amount you need.
Help to Buy mortgage rates
We can explain the advantages of the various types of mortgages and research the marketplace to find the right deal tailored to your situation.
Help to Buy Repayment of the Equity Loan & Mortgage
The government loan will interest-free for the initial five years. You will pay an admin fee of £1 every month for the equity loan over first year period.
After the five years are up, the interest rate is chargeable at 1.75% pa. The rate will then increase annually by the standard rate of inflation, as measured by the Retail Prices Index (RPI) plus 1%.
Upcoming Changes to the Help to Buy scheme in 2021
Caps will also be in place for the maximum allowable property price, and in the North East of England it will be around £186,000.
The government will still lend up to 20% of the value of the property, on the same terms as before.
Is Help to Buy Scheme Worth it?
The Help to Buy equity loan scheme helps first-time buyers who are unable to provide a deposit of more than 5% and not able to afford the cost of a conventional mortgage.
While it provides affordability and financial breathing space for the initial five years, it is only available to new-build properties so it may not appeal to everyone.
Feel free to contact us to discuss your options. And if the Help to Buy scheme is not for you, our
mortgage brokers in newcastle will do our best to provide with an alternative mortgage more suited to your circumstances.
