Mortgage Guarantees for Help to Buy Applicants
Deposit requirements are often one of the biggest obstacles to getting onto the property ladder; and the Help to Buy scheme does provide assistance, although you'll need a 5% deposit to qualify.
Here we'll run through different options to help you buy a property with a low deposit or no deposit at all - including Help to Buy and the alternatives.
For personalised recommendations on your best course of action, give the Revolution Brokers team a call on 0330 304 3040, or drop us a message to [email protected].
How Can a Help to Buy Mortgage Help?
Help to Buy is a government-backed initiative, which aims to support homebuyers who are struggling to raise a deposit, or to find competitive mortgage lending.
There used to be a Help to Buy mortgage guarantee scheme, which made it easier to find approval as a first-time buyer or home mover. Like Help to Buy, the mortgage guarantee initiative required a 5% applicant deposit and topped that up by up to 15%.
This scheme has been discontinued, but there are a few different alternatives available.
The Help to Buy equity loan requires the same 5% deposit, and you can borrow up to 20% of the property value or 40% in London.
You'll need a mortgage for the 75% balance - or 55% in London - and don't need to pay interest for the first five years. After five years, interest becomes chargeable at 1.75%, increasing each year by the Retail Price Index plus 1%.
A lifetime ISA, or LISA, is a good alternative to the now discontinued Help to Buy ISA. You can use this option if you are over 18, below 39, and a first-time buyer. The ISA works like a regular savings scheme, but with a limit of £4,000 per annum. For every amount you save, the government adds 25%.
As your savings grow by 25%, you can make up a deposit value faster. If you have used the scheme for over a year, you can use them as a deposit on any first-time buyer property up to £450,000 in value.
- Help to Buy Shared Ownership
Another Help to Buy option is to consider the Shared Ownership scheme - aimed at helping first-time buyers or those on low incomes buy a proportion of a property. Low income is classified as a household with a maximum income of £60,000 per year.
You can buy anywhere from 25% to 75% of a new-build, or a resale property, and pay a small amount of rent on the balance you do not own. You can also buy out the shares to earn more, or all, of the same property.
- Bank Purchase Assistance Schemes
As well as government schemes, you'll also find private initiatives and bank support programmes, usually for first-time buyers only. Examples include:
- Barclays - Family Springboard
- Lloyds TSB - Lend a Hand
This sort of scheme means that family members can contribute. There is usually a minimum contribution from the buyer and a limit of a 10% contribution from family members towards the property purchase price.
Generally, that cash is not used as a deposit, but the money is held in a savings account and paid back after three to five years with any interest accrued.
