What are Help to Buy and NewBuy?

Government-backed schemes to help more people become homeowners



The Government’s Help to Buy and NewBuy schemes are often talked about in the news – but what are they?

Put simply, Help to Buy and NewBuy are Government-backed schemes to help more people become homeowners. And if you’re someone who wouldn’t normally be able to borrow enough money to buy a home, they could help you make that step.

There are slight differences between the schemes – and two different Help to Buy schemes – but to take advantage of either you’ll need a deposit of at least five percent of the property’s total purchase price.


Help to Buy: Equity Loan

If you’re buying a new-build property you could consider a Help to Buy: Equity Loan. This is where the Government will lend you up to 20% of the purchase price to help you buy the property. This means that, with your 5% paid as well, you’ll only need to repay a loan on 75% of the property’s purchase price.

You have to pay back the 20% Government loan – but you won’t be charged loan fees on the debt for the first five years after you take it out.

The Help to Buy: Equity Loan scheme is only available on new build homes in England.


Help to Buy: Mortgage Guarantee

The second Help to Buy option is Help to Buy: Mortgage Guarantee. This is where you borrow all 95% of the purchase price from a mortgage lender, but the Government backs the loan with a guarantee that they’ll repay it if you can’t make the repayments.

You remain responsible for all the repayments, but the Government guarantee means the lenders will be more likely to offer you a high loan-to-value mortgage in cases where otherwise they’d insist on you having a much bigger deposit.

The Help to Buy: Mortgage Guarantee scheme is available on homes anywhere in the UK.


NewBuy

The NewBuy scheme is similar to the Mortgage Guarantee but only applies to newbuild homes up to a purchase price of £500,000.

There are some restrictions – the property must be your main home, owned wholly by you, and you’ll only get a NewBuy loan for homes built by builders participating in the scheme.

The NewBuy scheme is only available in England, although there is an equivalent scheme for homes in Scotland.

Help To Buy
New Buy

Publish date: 18/08/2017