Affording a Property with the Help to Buy Scheme

There is much excitement here at Bod Towers this week because… *drumroll*… we’re moving house! I’ll be writing more about this over the coming weeks (watch out for the new-house-joy around here!) but for some, owning a home of their own may seem impossible due to the costs involved.

It can be frustrating as it’s not the mortgage repayments you can’t handle, it’s that huge initial deposit that you’re finding hard to save up for. Especially with all those unexpected costs life throws at you like an expensive trip to the dentist or your car breaking down.

Luckily, there is Government help available in the form of the Help to Buy scheme. The idea behind the scheme is to help first‐time‐buyers get a foot on the property ladder by offering the chance to pay a deposit of as low as 5%. The scheme also aims to help existing homeowners who want to relocate but struggle with affording a large deposit.

But to be honest, it can be a little tricky to get your head around!

Basically, the Help to Buy scheme itself is made up of two separate parts. The first is an ‘equity loan’ which sees the Government provide you with a 20% loan (interest free for 5 years) on new build properties. That means that to get your hands on a brand new house, you only have to pay as little as a 5% deposit. The rest of the cost of the house is paid for via a 75% mortgage.

The second part of the scheme is a ‘mortgage guarantee.’ Again, you only have to pay a 5% deposit in order to secure a house but, in this instance, the rest of the cost of the house is paid for yourself with a 95% mortgage. The ‘guarantee’ part, is an agreement between the lender and the Government. The Government provides a safety net of 15% to the lender in order to reduce the risks that come with offering such a low deposit to buyers, which allows a 5% deposit to be possible.

To make things clearer, NatWest have created this infographic which illustrates the difference between the two parts of the scheme, as well as providing examples of how it all works.

Right I’m off to start working on my mood boards!

Top image copyright: chrupka/Shutterstock.com