The Help to Buy Mortgage Guarantee, also known as Help to Buy 2 (HtB2), is an evolution of the Help to Buy Equity Loan (HtB).
Conversely, this version focuses on the lender rather than the buyer; by making mortgages less risky for the lender, they can offer mortgages requiring lower initial deposits to the buyer. Furthermore, this scheme allows purchases on old homes rather than just new builds.
The Mortgage Guarantee
In this scheme the government offer the lenders up to 15% of the property value if the mortgage falls through due to foreclosure or repossession, if the buyer cannot keep up with the payments. In return, the lenders are to offer out mortgages of 95% of the property value, meaning the buyer will only have to save up a deposit of 5%.
What is the difference between Help to Buy and Help to Buy 2?
The names are similar, and indeed there are similarities between the two schemes, but the two should not be confused. HtB is focussed at the buyer and offers them an equity loanof up to 20% requiring a 5% deposit and a mortgage of 75%.
HtB2 offers a guarantee of 15% of the property value to the lenders in the event the buyer cannot keep up with payments and the property gets repossessed, and in return the buyer has to lay down only a 5% deposit.
HtB2 also can be used to purchase old properties which HtB could not. Both schemes are still only available on properties valued below £600,000.
|HtB Equity Loan||HtB2 Mortgage Guarantee|
|Government Equity Loan||20%||None|
|Guarantee to lender||None||15% of the property value|
|15% of the property value||£600,000||£600,000|
Initially HtB2 was set to become available in January 2014, but instead has been ushered forward and been made available as of October 2013, three months early. This is only a short term scheme, and at the moment is set to end in January of 2017.