Unlike the first phase of the scheme, which only applied to buyers wishing to purchase new-build homes, the second phase applies to previously owned homes as well as new properties.
What's in the second phase?
Under the second of the scheme, the government will give a guarantee to a participating lender when they lend to a buyer who has a deposit of between 5-20 per cent of the purchase price. The government will guarantee up to 15 per cent of the loan to the lender.
In exchange for this, the lender will pay a fee. There are three tranches of borrowers. For those with a deposit of:
- 5-10 per cent, the fee will be 0.9 per cent of the loan
- 10-15 per cent, the fee will be 0.46 per cent of the loan
- 15-20 per cent, the fee will be 0.28 per cent of the loan
Lenders can participate in one, two or all three tranches. If a buyer has a deposit which falls into a tranche that the lender is participating in, the lender must use the Help to Buy scheme. This is to avoid exposing the Treasury to only the riskiest mortgages.
This part of Help to Buy is available to first-time buyers and people moving home who are purchasing properties valued at up to £600,000. The guarantee only applies for the first seven years of the mortgage. The loans have to be capital repayment loans. Interest only mortgages are not included. The interest rates are likely to be higher than for non-Help to Buy loans.
These loans are now available from:
- Royal Bank of Scotland
- National Westminster Bank
- Lloyds Halifax
- Virgin Money