Help-To-Buy
Help to Buy Mortgage.
So you’re looking to get a Help to Buy mortgage? Here at TW Mortgages, we can help you get this arranged for your property. We’re a free mortgage advisor for Help to Buy mortgages in the southwest and beyond. We deal with a multitude of mortgages, such as Buy to Let mortgages, remortgages and more - get in touch to discuss your mortgage needs today!
Let’s break down exactly what Help to Buy mortgages mean, what a Help to Buy mortgage in principle means and how you can use the Help to Buy schemes to maximise your deposit savings.
What is a Help to Buy Mortgage?
Help to Buy mortgages are only available to first time buyers and are especially helpful to those who don’t have a large deposit. These schemes are great at helping you get on the property ladder and into your first home.
There are two main types of the Help to Buy scheme for house buyers:
Help to Buy: Equity Loan
Help to Buy: Shared Ownership
The Help to Buy Equity Loans are the most commonly used Help to Buy scheme when buying a property. However, if you want to find out more about the Shared Ownership option then you can find out more here
Help to Buy: Equity Loan
This is an equity loan provided by the government to boost your deposit savings - an incredible financial help for first-time buyers! However there are things that you need to be aware of when it comes to getting an equity loan in the Help to Buy scheme.
Anyone buying a home using the scheme will need to still put in a 5% deposit. For example, if you’re buying a £200,000 home, you will still need to put in a deposit of £10,000.
The government will add up to 20% (40% in London) to your 5% deposit, meaning that on a £200,000 house, the government would be putting in £40,000.
How to apply for a Help to Buy mortgage:
Applying for a Help to Buy mortgage is free. You can apply via your local Help to Buy agent who will give the authority you need to go-ahead with buying your home and will provide you with processes you must follow in order to apply. You can find your local provider here.
Once you have successfully applied for the Help to Buy Equity Loan, you’ll be given an Authority to Proceed. This document is incredibly important as the mortgage lender will want to see it as part of their underwriting.
What is a Help to Buy Mortgage in principle? Do I need one?
We highly recommend that you get a Help to Buy mortgage in principle prior to starting your Help to Buy journey. A decision in principle is one of the first steps of all mortgage applications and will help you get an offer accepted on your desired property.
We will work closely with you to ensure that we establish your borrowing potential. We do this by using a Help to Buy equity loan mortgage calculator to get a quick indication of whether you’re a good candidate for a Help to Buy equity loan. The Help to Buy mortgage calculator will take into account your income, the property price and location.
The decision in principle will verify you can borrow the amount you're after, plus it will check that your credit score is good enough to pass the lenders’ checks. It's far better to find out these two factors before getting too far into the property buying process.
A decision in principle is normally valid for 3 months so feel free to get one ASAP if you’re likely to put an offer on a house within that time period. It will still remain valid if you start a full mortgage application within that 3-months. If you do not begin your mortgage application before the Help to Buy mortgage in principle expires, you can obtain another one.
Will a mortgage advisor do a credit check for a Buy to Let mortgage?
We will need to check your credit score in order to get your Help to Buy decision in principle. However, some lenders offer a “soft” credit score which means we can check your credit report without other financial institutions getting visibility so it won't affect any future applications.
Help to Buy Mortgage rates explained:
The Help to Buy Equity Loan does not accumulate any interest within the first 5 years, so bear this date in mind when it comes to paying off your equity loan. It’s a good idea to pay it off as quickly as possible for a few reasons:
The equity loan has a 20% “hold” on your property meaning you will need to pay this 20% back in the future. If your house price increases, this will also be reflected in the amount you owe the government i.e. if your £200,000 house value increases to £250,000, your equity loan will also increase to 20% of this new value (£50,000 owed to the government).
The equity loan will begin charging interest after five years so focus on getting this loan paid off within this window of time.
When do you pay back your Help to Buy Equity Loan?
When you want to remortgage or sell your property, a Help to Buy agent will assess your property’s value and tell you how much you owe them, based on your property’s worth at the time.
You must repay your equity loan in full for any of the below circumstances:
at the end of the equity loan term
when you pay off your repayment mortgage
when you sell your home
if you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full
Source: helptobuy.gov.uk
Top tip for your Help to Buy Mortgage:
On the Help to Buy Government website, it suggests seeking a property first, reserve it with the seller and then seek financial help afterwards. It may not be sensible to do these actions in this specific order. There’s often a fee required to reserve a property (typically £500) which you may lose unnecessarily.
If you reserve the property before speaking to a free mortgage broker for advice, you may find that your affordability is too low or your credit score isn’t high enough to secure a lender for your reserved house. This will mean as you won’t be able to secure a lender, you’ll lose the house and you’ll lose that reservation fee unnecessarily.
Affordability and credit score are very important in securing a mortgage, so we recommend you to speak with a free mortgage advisor (like us!) first before proceeding with your house hunt.
Get in touch today to discuss your mortgage needs - we offer FREE mortgage advice so you can be safe in the knowledge that you won’t be paying any unnecessary fees when it comes to getting hold of a mortgage.