The Help to Buy scheme is a great idea for either single people or couples with lower incomes who cannot quite afford to get on the property ladder by themselves. There are two types of scheme:
1. Equity Loan – this is for new build properties only. The Help to Buy people give you 20% of the property value as a loan, you put in 5% deposit and the rest is made by the way of a mortgage. I think this is a great concept and it used to be called “Shared Equity” but has been jazzed up by the government and called “Equity Loan”
2. Mortgage Guarantee – This is for any property you wish to purchase on the open market i.e. new and second-hand homes. These homes must be approved by the Help to Buy people. You put in 5% of the property value and the government “guarantee” 20% of the property value. This guarantees the lender will get their money back if 1. the property decreases in value and 2. you stop making your mortgage payments and the mortgage lender repossesses your home. If the property value is less than the mortgage owed on the property, the “guarantee” ensures the lender gets all the money back therefore minimising the risk of them being out of pocket. It’s a guarantee for the lender that’s all. We recommend you get independent legal advice regarding this as there could be further financial implications and liabilities on your behalf if things should go wrong.
The maximum property value you could buy through this Help to Buy is £600,000 and you must also NOT own any other properties