Help to buy: mortgage guarantee

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Help to buy: mortgage guarantee scheme was announced by the government in March 2013 to help people who are looking to buy their first home or moving to an existing one but finding it difficult because they have a low deposit or cannot find a mortgage.

How this scheme works? The scheme aims to secure 20% of mortgage or loan amount; 5% comes from you in form of minimum deposit, and the remaining 15% is insured by the government. This way in a situation where the borrower is unable to pay the mortgage or is going to default on it, the lender’s 20% investment is secured or can easily be recouped. The scheme therefore takes off some of the risk associated with lending and increases the chance of a loan to be available to borrowers.

The borrower however should know that apart from having an increased possibility of a loan amount, the mortgage guarantee scheme doesn’t change much else. The mortgage interest rate, its terms and conditions, fees and your personal financial health are still important and must be met. Homes bought under this scheme although have all the rights as and when bought without using this scheme.

The Help to Buy scheme has a fund of up to £12 billion and will be running for 3 years from 2 January 2014.

The following terms and conditions apply to Help to Buy Mortgage Guarantee:

The property you are thinking of buying has to be your main and only home and you should not be buying it to rent out.

You cannot buy any other property in any other capacity such as a shareholder.

The property has to be in the UK.

You have to be 18 or over.

The property price has to be £600,000 or under.

You must have a deposit of 5% of the purchase or valuation amount.

Help to buy mortgage has to be on repayment basis meaning your payments have to consist both interest and capital.

Help to buy mortgage cannot be used to buy a shared or any other purchase.

You will still need to meet the lender’s criteria of affordability which means that the lender will check if you can afford the monthly payment.

You will still need to provide your income proof.

You will still need to have a good credit history which means that you should have no records of defaults etc.

Participating banks who are giving out help to buy mortgage:
Bank of Scotland

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