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Consumers are left in the dark with Help to Buy – who is eligible and who isn’t?

10 October 2013

Confusion is rife over which areas of the UK are eligible for what under the government's new Help to Buy scheme.

In April the first phase of the Help to Buy scheme was launched in England - the shared equity scheme - where the government will give homebuyers 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 scheme - 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 gives 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 executive have their own shared equity scheme, but the mortgage guarantee scheme - the second phase of Help to Buy - 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 homeowners 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.

£400,000 is the limit for the Help to Buy Scotland scheme and you can buy the equity share back whenever you like - all at once or in shares of 5%.

The Scottish government has put £220 million into this scheme for the next three years.

The Northern Ireland executive's system 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 5 years which increases with inflation every year after that.

The Welsh government on Wednesday announced that they were 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 announced.

Gocompare.com's mortgages expert Steve Williams said: "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?

"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.

"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."

Steve added: "There are many ways that new house buyers can access the information they need to ensure they are getting the right product for them. Here at Gocompare.com our partners London and Country offer free impartial mortgage advice - and the best thing for people interested in the schemes is to talk to an expert to make sure you are getting the best deal for your circumstances - whether that's Help to Buy or not."