Phase two of the Government's Help to Buy scheme was officially launched in October 2013.
This part of the scheme aims to help borrowers with at least a 5% deposit secure a 95% loan-to-value (LTV) mortgage from participating lenders on a new-build or existing home up to a value of £600,000.
Under the scheme, the Government offers mortgage lenders the option to purchase a guarantee of up to 15% on mortgages.
Because of this support, participating lenders are able to offer more mortgages to borrowers with small deposits.
Participating lenders pay the Government a fee in return for them guaranteeing a percentage of the mortgage. This means lenders are more comfortably able to offer borrowers mortgages up to 95% LTV.
This scheme is very different to the first phase of Help to Buy, which sees the Government provide borrowers with an equity loan of up to 20% of the property's value.
Find out more about Help to Buy: Equity Loan with our guide
Under the second phase, the Government simply acts as guarantor on eligible mortgage products, and isn't directly involved in providing finance.
This will see participating lenders pay the Government a small fee for this guarantee, and means that you, as a borrower, will only have repay the mortgage that you take out from the lender. In other words, you'll only be required to pay the amount determined by your mortgage provider, rather than having a mortgage and a separate equity loan to contend with.
If you want to take out a Help to Buy: Mortgage Guarantee product you must contact a participating lender. However, bear in mind that other providers also offer competitive 95% LTV products that aren't part of the Help to Buy scheme – check out the top mortgages for first-time buyers to find out more.
More information on phase one of help to buy mortgages - Equity Loans
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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