Everything you need to know about the 5% housing scheme

Now the new scheme is live the help to buy plan starts its work, assisting new homeowners in obtaining a mortgage with as little as a 5% deposit to purchase a home worth up to £600,000. It would operate by allowing lenders to buy a government guarantee that will reimburse them for a portion of their losses if a repossession occurs.

How do I apply for one of these mortgages?

The application process for these mortgages is the same as it is for every other mortgage, and many of the offers are available directly from the lender. When looking for the best mortgage deal for you, it’s a good idea to consult a mortgage broker to determine which form of mortgage is suited to you financially .

How long will the scheme run for ?

The scheme opened on Monday 19th April and will run until December 2022.

Which mortgage lenders are taking part?

The scheme is supported by a number of the UK’s largest mortgage lenders.Lloyds,Halifax, NatWest, Santander, Barclays, Bank of Scotland and HSBC, other lenders are expected to follow including, Virgin Money.The rates available differ depending on the lender and the particular mortgage deal you’re considering, but most give interest rates of about 4%.

Is the mortgage worth it?

These low-deposit mortgages should not be considered special mortgages in and of themselves; rather, they are one choice for those who are having difficulty getting on the housing ladder.

There is no benefit to a homebuyer taking out a 5% deposit mortgage through this scheme over a regular 5% deposit mortgage, so decide which is better for you.

What is help to buy?

Help to buy means you can apply for a mortgage with as little as a 5% deposit- the government is providing a loan called an equity loan, of up to 40% for properties in London and 20% outside of London , and the limit is 15% in Scotland. Since you’re getting a government loan, you’ll be able to borrow less money from the mortgage company. Since you loan-to-value ratio is lower, you’ll have access to a broader variety of mortgage rates.

 

Who is eligible for a help to buy equity loan?

To qualify for a Help to Buy equity loan, you must be purchasing a new-build property worth no more than £600,000 that you will live in as your primary residence. You don’t need to be a first-time buyer, but you will not be eligible if you own another property.

 

Do you think the new help to buy scheme is going to be useful?

Yes – Definitely
No – Not at all

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