Help to Buy Mortgage & Remortgage | A Complete Guide for UK Homebuyers

Over recent years, the property market has seen an immense boost in house prices, but in comparison, wages have not been rising at a competitive rate. The slow wage growth and stricter lending laws and regulations since the 2007 – 2008 financial crisis have led to a large proportion of the population struggling to get on the housing ladder. The government has addressed this issue by implementing schemes to help with the process of home ownership.

There are three types of Help to Buy schemes ongoing: Help to Buy ISA, which has now closed to new applicants, Help to Buy Shared OwnershipA scheme where a borrower purchases a share of a property an... and Help to Buy EquityThe difference between the value of the property and the amo... Loan, which are still actively open to new applicants.

Below, we look into the different types of schemes available and whether you qualify to use them.

What is a Help to Buy Mortgage?

A Help to Buy mortgage is a government-backed scheme aimed at helping first-time buyers and existing homeowners purchase a new-build home with as little as a 5% deposit. This initiative has made homeownership more accessible to thousands across the UK.

How Does Help to Buy Work?

The scheme provides an equity loan that can be used towards your new home, covering up to 20% (or 40% in London) of the property value. You’ll still need to secure a mortgage for the remaining amount, but with the government’s help, this becomes much more manageable.

Click this link for a more in depth look into Shared Ownership as well as the advantages and disadvantages, and whether it’s the right scheme for you.

Eligibility for a Help to Buy Mortgage

To qualify for a Help to Buy mortgage, you must meet specific criteria, such as being a first-time buyer or a homeowner looking to move. The property must be a new build and valued under a certain price threshold.

Help to Buy Remortgage: How Does it Work?

If you’ve already purchased a home through the Help to Buy scheme, you might consider a Help to Buy remortgageRefinancing an existing mortgage with a new mortgage.. This process involves refinancing your existing Help to Buy mortgage, potentially unlocking better interest rates or releasing equity from your home.

Why Consider a Help to Buy Remortgage?

A Help to Buy remortgage could lower your monthly payments, reduce the interest rate on your loan, or free up some equity. It’s particularly beneficial as you approach the end of the initial fixed-rate mortgage term or if your financial circumstances have improved.

Steps to Remortgage Your Help to Buy Home

1.Assess Your Current Mortgage: Understand the terms of your existing Help to Buy mortgage, including interest rates and any fees.

2.Consult with a Mortgage Advisor: An advisor can guide you through the best remortgage options available, tailored to your financial situation.

3.Choose a New Mortgage Deal: Select a remortgage product that suits your needs, whether it’s a lower interest rate or a fixed term.

4.Apply for the Remortgage: Complete the necessary paperwork and wait for approval.

5.Finalize the Deal: Once approved, your new lender will pay off the old mortgage, and you’ll start making payments under the new terms.

Pros and Cons of a Help to Buy Mortgage

While the Help to Buy mortgage scheme offers many advantages, including lower deposits and government backing, there are also some downsides to consider, such as repayment terms and property restrictions.

Conclusion: Is Help to Buy Right for You?

Whether you’re a first-time buyer considering a Help to Buy mortgage or a homeowner looking to remortgage under the scheme, it’s essential to weigh the benefits against the drawbacks. Always consult with a mortgage adviser to explore your options and find the best deal tailored to your circumstances.

FAQs on Help to Buy Mortgages

1. What is a first-time buyer mortgage, and how does it work?

A first-time buyer mortgage is a loan for people who have never owned a property before. As a time buyer, you borrow money from a mortgage lender to buy a home. The amount you borrow, plus interest, is paid back in monthly payments over a mortgage term. The length of this term and the mortgage rate affect your monthly mortgage repayment.

2. Can I buy a home in Northern Ireland with a government equity loan?

The government equity loan scheme is available in different parts of the UK, including Northern Ireland. This loan helps you with the purchase price of a newly built home, reducing your initial mortgage and deposit requirements.

3. What is a guarantorA person who guarantees to repay a mortgage if the borrower ... mortgage?

A guarantor mortgage allows a parent or family member to guarantee your mortgage payment. If you can’t make a monthly payment, your guarantor is responsible. This type of mortgage is often used by first-time buyers with a smaller deposit or lower credit rating.

4. How much deposit do I need for a mortgage?

The minimum deposit typically ranges from 5% to 15% of the property purchase price. A larger deposit generally means better mortgage rates and a lower monthly payment. Deposit requirements can vary by mortgage provider and mortgage product.

5. What’s the difference between a repayment mortgage and an interest-only mortgage?

With a repayment mortgage, you pay back part of the loan and the interest each month. By the end of the mortgage term, you’ll own the home outright. An interest-only mortgage means you only pay the interest monthly, and you must repay the loan in full at the end of the term, typically by selling the house.

6. Are there special mortgages for shared ownership homes?

Yes, shared ownership mortgages are designed for shared ownership schemes where you buy a portion of a home from a housing association and rent the rest. You own part of the home and pay a mortgage on the portion you own and rent on the remainder, along with any service charge or management fee.

7. What is a mortgage broker, and do I need one?

A mortgage broker is a specialist who can offer fee-free mortgage advice and help you find the best mortgage deal. They have access to a wide range of mortgage products from various mortgage providers and can navigate through your mortgage situation to find a suitable mortgage solution.

8. How do I know how much I can borrow for a mortgage?

Your borrowing capacity is determined by your income, credit rating, debts, and overall mortgage affordability. A mortgage calculator can give you an estimate, but for a more accurate figure, consider a fee-free initial mortgage appointment with a broker or advisor.

9. What is a fixed-rate mortgage vs a variable-rate mortgage?

A fixed-rate mortgage keeps the same interest rate for a set period, meaning your monthly mortgage repayment won’t change during this time. A variable rate mortgage means the interest rate can change, usually in line with the Bank of England’s base rateThe interest rate set by the Bank of England, affects the in..., affecting your monthly payments.

10. What is the mortgage guarantee scheme?

The mortgage guarantee scheme is a government-backed scheme to encourage lenders to offer 95% mortgages (meaning only a 5% deposit is needed) to home buyers. This scheme is aimed at helping more first-time buyers onto the housing ladder, especially those with smaller deposits.

11. How does remortgaging work?

Remortgaging is when you switch your existing mortgage to a new deal, possibly with a new lender. You might remortgage to save money with a lower rate, borrow more money, or adjust your mortgage term. It’s a way to find a better mortgage solution as your situation or the market changes.

12. What is negative equityA situation where the value of the property is less than the..., and how does it affect me?

Negative equity means your house is worth less than the remaining mortgage. This can happen if property prices fall. If you’re in negative equity, selling your home won’t cover the mortgage, and you might find it hard to move house or switch to a better mortgage deal.

13. How do I apply for a Help to Buy Equity Loan?

You apply through a Help to Buy agent in the area where you want to buy. The scheme is for newly built homes and requires at least a 5% deposit. The government provides an equity loan of up to 20% (40% in London) of the home’s value, interest-free for the first five years.