Dream of Owning a Luxury Home but Don’t Have a Big Deposit? Help is at Hand with the UK GOV Help to Buy Scheme

With house prices soaring, and rental prices crippling a large percentage of the UK’s population, many young people are worried they will never have enough money to buy a home of their own. However, the UK government’s Help to Buy scheme may be the answer. Whether you want to buy your first home, or already have a house and want to invest in a better one, the Help to Buy scheme enables people to buy an existing home or a new build with as little as a 5% deposit.

There are two main elements to the Help to Buy scheme. Keep reading to find out what these are.

1. Equity Loan
The Equity Loan scheme is available until 2020 and is available for both home movers and home buyers. The property must, however, be a new build home, and it must be being purchased as your residence and not as a buy-to-let property.
Under this scheme, the buyer is responsible for saving a 5% deposit, and the government will supply an extra 20%. This gives home buyers a mortgage of 25%, making them more attractive to mortgage companies.

For the first five years, the government’s loan is interest free. After this period, interest will be charged, but at a competitive rate. In year six, the interest will be $1.75%, and after this, the interest will increase by 1% each year. Borrowers can pay back the loan at any point without penalty.

The only negative could be if you sell your home before paying off the loan. The government will retrieve its 20% stake in your property at its current value. If house prices have increased a lot, this could cost you a lot of money. Also, you will be subjected to the same credit checks as you would a normal loan, and your income will need to be high enough to cover the mortgage repayments.

2. Mortgage Guarantee
The Mortgage Guarantee was unveiled in October, 2013, and is set to remain in place until December 31, 2016. This scheme again aims to help buyers with small deposits to buy a home of their own. It can be used to buy any home (new or old) worth less than £600,000.

Under this scheme, the buyer is again responsible for saving a 5% deposit, and the government will provide anywhere up to a further 15%. The aim again is to make people more attractive to mortgage companies – the higher the deposit placed, the lower the monthly mortgage payments will be.

Again, this scheme is only available to people who are buying a home to live in, and is not suitable for people looking to rent out their home, or for people who are buying a second property. It is purely aimed at helping first time buyers to get onto the property ladder.

If you are in the position where you may be able to buy a home within the next five years, it is worth trying to save a 5% deposit and making full use of one of the government’s Help to Buy schemes.

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