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How does the Help to Buy scheme work?

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21/03/2013
The Government's Help to Buy programme has been launched to much fanfare, but what is it?

Chancellor George Osborne has announced the Help to Buy scheme, aimed at making home ownership a reality for people across the UK

The programme has two key components:

The first is an expansion of the First Buy scheme to include all buyers, rather than limiting to first-timers as had previously been the case. The government is making an additional investment of £3.5bn to fund the scheme.

Here are the key points behind the offer:

• Applies to new build properties only

• Borrowers contribute 5% deposit while the Government loans 20% of the property value through an equity loan

• The remaining 75% is obtained from a mortgage lender

• Maximum purchase price of £600,000

The scheme will be available from 1 April 2013 and run for 3 years.

The second component is a mortgage guarantee scheme which will be open to all homebuyers and which builds on the NewBuy scheme. The government hopes this will encourage lenders to offer better access to low-deposit mortgages.

Here are the key points behind the offer:

• Applies to new build and existing homes

• Borrowers contribute 5-20% deposit while government loans guarantee covers the remaining amount above 80% LTV alongside the lender’s contribution

• Maximum purchase of £600,000

The scheme will be available from January 2014 and run for three years, although this could be extended with Bank of England approval.

To see an illustration of the Help to Buy scheme click HERE

HelptoBuyInfographic title=

 

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