What is a help to buy mortgage broker?
A help to buy mortgage broker is a specialist mortgage broker who can assist you in getting a help to buy mortgage.
A help to buy mortgage broker could be used when you buy a property with:
A help to buy equity loan
A shared ownership and more
A help to buy mortgage broker for your help to buy equity loan
A help to buy mortgage will be needed when you apply for a mortgage with a help to buy equity loan and a help to buy mortgage broker with specialist experience can help you get a help to buy mortgage.
A help to buy equity loan is a first-time buyer government loan the government gives you up to 40% towards the purchase of your home. The home must be less than £600,000 in London and less than £450,000 outside London. The help to buy equity loan is up to 20% of the property price outside London and up to 40% of the property price in London
As the government provides either a 20% or up to 40% mortgage deposit in the form of an interest-free loan for you, you will need a 5% mortgage deposit to be eligible for the help to buy scheme and mortgage.
This means outside London you will effectively have a 5% mortgage deposit and a 20% loan for the government meaning you will have a 75% Loan to value (LTV). This makes it more likely that the help to buy mortgage lender will offer you cheaper rates as you are borrowing more. If you were buying your help to buy property in London and utilised the 40% help to buy equity loan alongside your 5% mortgage deposit you will essentially have a 55% Loan to value (LTV).
The help to buy equity loan is interest-free for the first 5 years after which you will begin to make monthly loan repayments. Interest on your help to buy equity loan is charged at 1.75% and then 1% plus RPI each additional year. You must repay your help to buy equity loan after 25 years.
What is the help to buy scheme in Scotland?
The government’s Help to Buy scheme in Scotland is made up of two schemes:
The Help to Buy (Scotland) Affordable New Build Scheme: This help to buy scheme is for larger developers and home builders.
The Small Developers New Build Scheme: This scheme is for much smaller developers
The rules and eligibility for both of the Scottish help to buy schemes are both the same.
A help to buy mortgage broker for your shared ownership
With a shared ownership mortgage you will essentially be able to buy a shared in an eligible help to buy property and pay rent on the rest. The minimum share you can purchase in a shared ownership property is 25% and the maximum share you can initially purchase is 75%. You can then go on to buy more shares in the shared ownership property through a method known as staircasing. Your help to buy mortgage broker will also be able to assist you with both of these processes.
Are you eligible for a Help to buy mortgage?
Your help to buy mortgage broker will inform you of what you need to be eligible for the help to buy equity loan scheme and in theory a help to buy mortgage.
This will include:
- a minimum of 5% for your mortgage deposit
- You cannot purchase a buy to let property
- You cannot rent out any part of the help to buy property
- Your property cannot be more than £600,000
- You must be a first-time buyer or a home mover with no other property in the world.
- You cannot have any overdue payments on any loans, any county court judgments (CCJs) against you for more than £500 nor can you have a bankruptcy on your credit file within the last 3 years.
- You can only use a standard repayment mortgage, you won’t be able to use any unique type of mortgage such as a guarantor mortgage or offset mortgage.
- You cannot use any other Government schemes with your help to buy scheme aside from a help to buy ISA.
The role of your help to buy mortgage broker
Your help to buy mortgage broker will be responsible for ensuring you have all your relevant documents in place
They will liaise with your help to buy conveyancer and ensure that you have sought the appropriate documents from the help to buy agency so your mortgage process isn’t delayed.
Your help to buy mortgage broker will then seek the best rate for you on your mortgage based on your financial status, needs and future plans.
Can you get a 100% LTV help to buy mortgage?
Your help to buy mortgage broker will be able to guide you better on this but 100% loan to value LTV mortgages for help to buy schemes are rarely possible.
Can you get a help to buy mortgage with bad credit?
You can get a help to buy Mortgage with Bad credit but your help to buy mortgage broker will need to have specialist knowledge of bad credit mortgage lenders and their criteria for them to be able to assist you effectively.
Bad credit could include County court judgements(CCJs), Individual voluntary agreements(IVAs), defaults on credit or bankruptcy.
You should always look to build your credit prior to applying for a help to buy mortgage.
Can I afford a help to buy mortgage?
Your help to buy mortgage broker will be best placed to analyse your mortgage affordability for a help to buy mortgage but typically if you meet the eligibility requirements for the help to buy equity loan or shared ownership scheme and have a 5% mortgage deposit, have an income that is at least 4x the mortgage you are seeking then you should be able to afford a help to buy mortgage.
Which banks offer help to buy mortgages?
There are a fair few banks offering the help to buy mortgages but this can change at any moment so you should consult with your help to buy mortgage broker rather than going directly to a help to buy mortgage lender. As of now the banks offering the help to buy mortgages include:
- Chorley Building Society
- Cumbria Building Society
- Leeds Building Society
- Newbury Building Society
- Teachers Building Society
- Virgin Money
- Post Office
- Lloyds Bank
What happens after 5 years with the help to buy?
After 5 years your help to buy equity loan repayments will kick in and you will have to repay your help to buy equity loan every month. The APR is fixed at 1.75% but this rises every year by 1% plus the RPI. Your help to buy mortgage broker and the lender will take this into account when working out how much you can really afford.
Can you sell your house with help to buy?
Yes, you can sell your help to buy property at any time but you must first gain authorisation from the help to buy agent who will instruct a royal institute of chartered surveyors valuation at a cost to you then agree on the minimum sales price. After the sale is done you must then pay the help to buy agency its share of your popery. Alternatively, you could repay the help to buy agency before the sales process.
Can I use the help to buy twice?
Yes, you can indeed use the help to buy twice but you will have to be in the process of selling your current help to buy a home or you will have to have sold it first before you could use the help to buy equity loan a second time. You should seek assistance from a help to buy mortgage broker when applying for a second help to buy mortgage.
Can you put more than 5 deposit on help to buy?
Yes, you can put more than a 5% mortgage deposit down on your help to buy mortgage, your help to buy mortgage broker or the mortgage lender will show you how this will affect the interest you are charged on your help to buy property and your monthly mortgage repayments.
How is help to buy repaid?
The help to buy equity loan must be repaid after 25 years and it is repaid by you after the 5th year in which you took out the loan. You will have to make monthly repayments from then on at a fixed rate of 1.75% which rises by 1% plus RPI every year.
Can you rent out a house on help to buy?
No, you cannot rent out your help to buy house under any circumstances but in any case, if you plan to rent your help to buy property out you must inform the help to buy agency and the mortgage lender as you could be breaking both agreements you have with both parties.
Do you have to be a first-time buyer for help to buy?
No, you can be a home mover and use the help to buy equity loan scheme but the government is placing new restrictions on the help to buy scheme which will make it only available to first-time buyers in 2021
Can I remortgage to pay off help to buy loan?
Yes you can remortgage to pay off your help to buy equity loan but due to the fact that most new build properties are overpriced you might find that you are stuck in negative equity as your mortgage is worth more than your property and you are unable to recover any funds to pay off your help to buy equity loan
Can you pay back help to buy before 5 years?
Yes, you can pay back your help to buy equity loan before 5 years by buying out the help to buy agents stake, using your savings or remortgage and paying with an increase in equity.
Alternatives to the Help to buy schemes?
- Lifetime ISA- gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire- same as above.
You may also be able to use a host of mortgages with the help of your family.
They are a certain type of mortgage known as a family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the lloyds lend a hand mortgage or the post office family link mortgage.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.