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Help to buy schemes can be valuable for getting first-time buyers onto the property ladder. As a government-backed option explicitly designed for new-build properties, a help to buy mortgage can provide an opportunity to buy a home sooner for individuals that fit into a specific set of criteria. You may be wondering, 'are help to buy mortgages worth it?' for your particular circumstances. We cover what help to buy mortgages are and some of the key pros and cons to help you make up your mind.
A help to buy mortgage is a specific mortgage that allows first-time buyers to use the government Help to Buy: Equity Loan scheme to purchase a property. These mortgages allow buyers to buy a new-build home without saving a significant deposit, providing access to potentially lower rates and more mortgage options than they may be able to achieve alone. Depending on where you live, you may be able to borrow 20% of the value of a property, or 40% if you are buying in London.find me a mortgage
In April of 2021, the Help to Buy: Equity Loan scheme was changed and revised with a new scheme due to end in March 2023. This scheme introduces price caps for the value of a property based on specific regions. These range from a price cap of £186,100 in the North East to £600,000 in the London region. Scotland and Wales have their own versions of equity loan schemes, and the Forces Help to Buy scheme also offers an alternative with a capped loan that equates to up to 50% of their annual salary for a house deposit.
Are help to buy mortgages worth it if you want to buy a home in 2022 or 2023? Whether or not a help to buy mortgage is suitable for you will depend on your personal circumstances, requirements and goals for your first home. We've covered some of the key advantages and disadvantages you should consider below:
Hundreds of thousands of people have utilised a version of the help to buy scheme to purchase their first home. Here are some of the advantages to choosing a help to buy mortgage:
Unlike a help to buy shared ownership scheme, a help to buy equity loan means you own your property 100%, and no one else has a stake in it. If you're keen to get on the property ladder and don't want to risk shared or split ownership, a help to buy mortgage can allow you to retain ownership from the moment you purchase a home.
Help to buy loans are used to top up a deposit beyond what you've already saved. Instead of waiting years to save a more significant percentage, a help to buy mortgage can allow you to access a 75% mortgage by providing an additional 20% deposit on your existing savings. This boost can allow you to buy more quickly, allowing you to take advantage of competitive deals when they arise.
Help to buy equity loans are completely free of interest for the first five years, which can provide some welcome breathing room in the first few years of mortgage repayment. However, you will still be paying interest on your mortgage, and once five years are up, you'll pay 1.75% for the first year, followed by an interest rate set by the rate of inflation plus 1%.
When you take out a help to buy loan, you have the opportunity to pay off your loan at a faster pace if you would prefer to do so. Unlike some loans that have set rules about repayment, you can choose to pay off large chunks of your loan in the first few years. If you choose to pay off your loan in full before five years you may need to pay for a valuation and cover a £200 fee, but you won't be charged any interest at all.
While there are plenty of advantages to help to buy mortgages, they aren't the most suitable option for every circumstance. Here are some of the disadvantages of seeking a help to buy mortgage for your first home:
When you take our a help to buy equity loan, you aren't taking out a fixed loan with a defined amount. Instead, your loan is tied to the value of your property, which means you'll likely pay more than you were loaned as your property value increases through inflation.
Once your six years are up, five interest-free, one fixed at 1.75%, you'll need to pay interest rates according to the RPI, plus 1%. Over time, this means your interest rates will continue to rise. You'll also need to pay a monthly management fee for your help to buy loan, so this is worth considering up-front.
Some mortgage lenders don't offer the option for help to buy mortgages, which may limit what deals and opportunities you can pick from. Lenders that offer help to buy mortgages will often have them as a different option to a standard mortgage, which means the terms and deals may be different from a standard 75% mortgage offering.
The help to buy scheme is exclusively available for first-time buyers looking to purchase a new build home from specific developers. This stipulation limits where you can live based on where houses are being built and the availability of properties. If you'd prefer an older property or you don't like the idea of a new build, a help to buy mortgage may not be the right fit for you.
Are you considering a help to buy mortgage? Try our mortgage calculators online today to discover what you could afford with a 20% deposit for a new build property. Or for more information and guidance, get in touch with our knowledgeable team today. As mortgage brokers, we can help you find a suitable help to buy mortgage for your needs and goals.
As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repaymentsContact Us