Common myths about Help to Buy dispelled
The launch of the latest phase of the Government’s Help to Buy scheme has generated a huge amount of interest from buyers. But an understanding of exactly how the scheme works remains sketchy, with borrowers wanting to know if they meet the criteria to apply.
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Q: Is the scheme only for first-time buyers?
A: No, the mortgage guarantee scheme applies to first time buyers as well as those who have an existing home and are looking to move. However, the property must be your residential home and cannot be a buy-to-let property.
Q: I hear the mortgage guarantees are not being introduced until January 2014, can I move before then?
A: Yes, you can. The mortgage guarantees are not being introduced until January 2014, but it means lenders are now offering cheaper home loans as it is impossible to default on a mortgage before the end of the year.
Q: Can I only buy a new build property with the scheme?
A: No, the mortgage guarantees apply to both new build and existing properties up to the value of £600,000. The first phase of the Help to Buy scheme – known as equity loan – is for new build homes only.
Q: Can I buy a property regardless of my salary?
A: Essentially, a Help to Buy home loan with a mortgage guarantee is the same as a ‘normal’ mortgage, so the same terms and conditions apply between you and the lender.
Q: Am I restricted on the number of bedrooms?
A: No, there is no restriction on the number of rooms. However, there is a restriction on the value of the property, which is up to £600,000 under the mortgage guarantee scheme.
Q: Does the scheme apply to anyone living in the UK?
A: Yes, the mortgage guarantee is available to all UK citizens. It is in contrast to the equity loan phase of the scheme, which is available in England and is for new build homes costing up to £600,000. Scotland has its own equity loan scheme for properties up to £400,000, while Wales is expected to announce a version soon.
Q: Will different lenders offer separate Help to Buy mortgage rates under the scheme?
A: Yes, different lenders set their own terms and rates – although the Government-backed guarantee means the rates should be lower than they would have otherwise been for those buyers with a smaller deposit.
Q: Are the mortgage guarantees just an extension of the equity loan scheme scheme announced earlier this year?
A: No, the mortgage guarantee is a Government-backed guarantee only. There is no equity loan, as with the first phase of Help to Buy.
Q: Which phase of the scheme is best for me?
A: One of the key differences between the two schemes is that buyers purchase 100 per cent of a property with the mortgage guarantee, whereas they purchase only 80 per cent under the equity loan scheme (where the Government provides an equity loan to cover the remaining 20 per cent). In addition, the equity loan scheme is only available on new build properties.