Help to Buy

The Help to Buy scheme is made up of two parts:

• an 'equity loan', (from 1 April 2013) where the government will lend you up to 20% of the value of your newly-built home
• a 'mortgage guarantee', where the government will guarantee part of your mortgage if you only have a small deposit 

The equity loan scheme - for newly built property

This scheme started on 1 April 2013 and will be available in England only. The Welsh and Scottish governments and the Northern Ireland Assembly will have funding for similar schemes.

Under the loan scheme, if you have a 5% deposit and want to buy a newly-built home, you can apply for a loan worth up to 20% of the value of the property. So you will only need to take out a mortgage for 75% of the cost of the property.

The loan is funded by the government and will be interest-free for the first five years. After that, you will pay a fee of 1.75%, which rises in line with inflation. You can repay it at any time - you can even wait until you sell the property before you pay it back.

 
Help to Buy replaces a previous scheme - FirstBuy

Help to Buy loans are available to movers as well as first-time buyers

• you don't have to be on a low income to qualify
• loans are available on properties worth up to £600,000

You can apply for the scheme via participating house builders or through a 'Home Buy agent'.

The mortgage guarantee scheme - for newly built and existing property. It will be available throughout the UK.

The mortgage guarantee part of the Help to Buy scheme is designed to help you get a mortgage, if you only have a small deposit.

One of the problems experienced by people looking for a mortgage is that most mortgages - and the lowest interest rates - are only available to those people who need to borrow 75% or less of the value of their property. If you're looking to borrow 90% or 95% there are only a very few expensive deals around.

However, under the scheme, if you have a deposit of between 5% and 20%, mortgage lenders will be able to buy a guarantee from the government that will compensate them if you default on your mortgage. So, in other words, with some of the risk removed, your mortgage company should be able to lend you the money to cover 90-95% of the purchase price of a property.

Some key advantages of the scheme:

• the mortgage guarantee is available to movers as well as first-time buyers
• it's available on both newly built and existing properties
• you can get it on properties worth up to £600,000