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Govt's Help to Buy scheme can help with large mortgages too

Written by Sam Jones on 26 May 2013.

The Government has launched a Help to Buy mortgage scheme to get the housing market moving but with an upper limit of £600,000 it can help more than just first-time buyers.

Help to Buy comes in two parts with a shared equity loan scheme and a mortgage indemnity guarantee.

The shared equity loans are available now from certain lenders and allow borrowers to buy new build homes with a 20% five-year interest free loan from the Government.

It works by the borrower stumping up 5% and the Government loan bringing the total loan to value to 75% cutting mortgage costs and allowing borrowers to buy or move with a low deposit.

The mortgage indemnity guarantee scheme is set to launch in January 2014 but has similar targets to remove the huge deposit barrier for buyers.

The borrowers again put up 5% of the property price and the Government will insure between 5% and 15% for the lender meaning the actual mortgage rate should reflect an 80% mortgage and limit risk for lenders.

Help to Buy aims to help first-time buyers and home movers with £130bn worth of loans over three years meaning huge swathes of people will benefit including those looking for big mortgage loans.

House prices

The Help to Buy scheme has come under fire from a wide range of influential bodies and figures for simply pushing up house prices.

Bank of England governor Sir Mervyn King could create a US-style housing boom caused by state-backed lenders Freddie Mac and Fannie Mae.

The Government's Office for Budget Responsibility has warned that house prices will artificially increase and has been backed by former chancellor Alistair Darling and the International Monetary Fund.

It is seen as a boon to mortgage lending without building more homes so a Government inspired boost to prices that could tail off when the scheme ends.

It means that people getting on to the scheme now could enjoy rise over the next few years and the benefits for large loans will be bigger than cheaper properties.

Second homes

Another criticism has been that the indemnity scheme will be open to people buying second homes as well as first-time buyers.

The Government says it is not the aim of the scheme but has not ruled it out as it launches a consultation on the finer details.

The ability to buy second homes worth up to £600,000 for a deposit of just £30,000 could be attractive to many borrowers.

The Government wants to boost the economy so any boost to housing transactions will be welcomed particularly on more lucrative large loans.

Brokers

Help to Buy is a complex scheme and the best way to understand your options and what deals are available is to speak to a qualified mortgage broker who knows what is out there.

They can guide you through the details of when you need to pay back your shared equity loan or what the differences are between using the scheme and not.

Brokers will have access to the vast majority of indemnity loans as lenders will be looking to lend and capitalise on Government support.

With homes available up to £600,000 Help to Buy can help those looking for large loans and not just first-time buyers looking for a cheap first home.

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