In April the first phase of the Help to Buy scheme, shared equity, was launched in England where the government gives home buyers equity loans of up to 20% for the price of a new property worth up to £600,000.
Then earlier this week the second phase of Help to Buy, the mortgage guarantee, was launched. This is relevant to the rest of the UK but the government will underwrite up to 15% of the house price, as long as the buyer puts down a 5% deposit. The Help to Buy mortgage, obtained from a participating bank, will cover the remainder.
The confusion has arisen as the Scottish government and Northern Irish executives have their own shared equity scheme, but the mortgage guarantee scheme is also applicable in those areas, and is backed to the tune of £12 billion by central government.
Help to Buy Scotland is a shared equity scheme which helps first time buyers and existing home owners get new build homes from participating builders. A 5% deposit is needed and the Scottish government will take a 20% equity share of the value of the house.
This share can be bought out at any time, and you won't need to pay anything to the government unless you want to buy the 20% share. The Scottish government has put £220 million into this scheme for the next three years but it is limited to houses worth £400,000 or under, less than in England.
The Northern Ireland the system is different and is called the co-ownership scheme and has been running since 1978. Potential home owners can take as big a share in a house as they can afford, between 50% and 90%, known as a starter share, and they can then increase that share at any time. This scheme applies to new or old houses that are £175,000 and under.
Co-ownership buyers are known as leaseholders, because they receive a 99 year equity sharing lease on their property. The buyers then pay rent on the remainder of the equity share. So if the buyer owns 75% of the property, the rent is calculated on the other 25% share. As in Scotland, Northern Irish home owners can buy 5% of house's equity from the scheme at a time.
Both the Scottish and the Northern Irish schemes don't charge any interest on the equity share, but in England there is a 1.75% charge on the share after five years which increases with inflation every year after that.
The Welsh government has just announced it will be investing £174.5 million into its Help to Buy Cymru scheme for people wishing to buy new build homes. The details of the scheme have not yet been made available.
‘When we contacted government officers in Scotland and Wales there was confusion about whether the second phase, the mortgage guarantee scheme, was applicable in those areas. If we are struggling to get this information what chance do first time buyers have?’ said Gocompare mortgage expert Steve Williams.
‘It's tough enough for lots of consumers to get their heads around mortgages and shared equity schemes but then to have four different schemes working throughout the UK and a different mortgage guarantee scheme, just adds more misunderstanding,’ he pointed out.
‘There needs to be some clear guidelines on who is eligible for what, in what areas and how much it will cost them. We need to help first time buyers get on the market, not confuse them with different schemes and different terms,’ he added.
He believes that people should access free advice and talk to an expert to make sure they are getting the best deal for your circumstances whether that's Help to Buy or not.
