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Need Help to Buy?

Help to Buy is a government backed scheme to help people who do not have a large deposit to buy a house. There are two parts to the scheme:

Equity loans
These were launched in April 2013. If you are buying a new-build property for less than £600,000 you can apply for a loan of 20% of the value of the property. It is not restricted to first time buyers, as some previous, similar schemes have been but you will require a minimum 5% deposit from your own funds and there are some restrictions and rules you need to be aware of:

• You cannot own another property
• You cannot sublet the property
• You have to have a first mortgage with a mainstream bank or building society.
• When you sell the property you will pay back 20% of the sale price.
• No charges are made for the first five years and from the sixth year onwards you are charged a fee of 1.75% of the value of the loan. The fee then increases each year by RPI plus 1%.

Mortgage guarantee
This second part of the scheme came launched in October 2013. Participating lenders are offering mortgages of up to 95% of the value of the property under the scheme. The buyer needs to have a deposit of at least 5%. The lender can then buy a guarantee to protect the high loan to value. (The guarantee is for the benefit of the lender only and does not guarantee your payments but does enable higher loan to value mortgages to be available for borrowers).

Unlike equity loans, this part of the scheme is not limited to new-build properties but the purchase price must be less than £600,000and you cannot own another property or let the property out.

Other schemes
There are other schemes available to help buyers. Shared ownership schemes are provided through housing associations. Rather than owning 100% of the property, you buy a share in the property and then rent the remainder from the housing association.

Another alternative is low-cost housing. These are properties where the sale price of the property is restricted to a certain percentage of the market value, to ensure they remain affordable to qualifying purchasers.

With more lenders signing up to the Help to Buy mortgage guarantee scheme each month, this should help to alleviate the issue of buyers struggling to raise a big enough deposit, kick start chains and allow buyers to move to their chosen property.