What is Help to Buy?

Getting a foot on the property ladder can be tricky these days. With house prices rising, it often seems that the possibility of ever being able to afford a deposit, let alone affording a home is just a distant dream.

Help is at hand, though. The Government’s Help to Buy scheme aims to help those interested in buying a property who are able to afford mortgage repayments but who can’t afford a large deposit, making the prospect of buying a property a lot more feasible.

The scheme is designed to help those looking to buy their first property as well as those who already own a property but are looking to relocate. The scheme is split into two parts. The first is an equity loan, which is exclusive to those wishing to purchase a new-build property. Borrowers need to provide a mortgage of as low as 5%, with the rest of the money coming from a 75% mortgage and a 20% loan from the government. This loan is interest free for 5 years.

The second part of the Help to Buy scheme is a mortgage guarantee. Unlike the first phase, it is not exclusive to new-build properties. Again, borrowers can benefit from paying a deposit as low as just 5%, whilst the rest of the property is paid for through a 95% mortgage. In this part of the scheme, the Government does not directly lend money to the borrower. Instead they provide a guarantee of 15% to the lender, which acts as a safety net if the borrower ever defaults on payments and therefore the risk of providing such a low deposit is reduced for lenders.

If this all still sounds a little confusing, NatWest has created this useful Help to Buy infographic. It explains the different parts of the scheme visually and provides examples of how it all works – making understanding things a bit simpler.