The Help to Buy scheme is an initiative created by the government to help first-time buyers and existing homeowners buy residential property in England.

There are multiple Help to Buy schemes, each suitable for a different kind of buyer. They come with specific conditions which enable certain benefits, like low deposits and the ability to buy a higher value property. If you’re suitable, they can help you make that purchase you thought would never happen.


Who is Help to Buy for? 

Help to buy

As the name suggests, the Help to Buy schemes help people - who would otherwise be unable - buy a property. You may be:

  • A first-time buyer struggling to take their first step
  • A current homeowner looking to relocate and upgrade
  • A previous homeowner unable to re-enter the property market
  • A homebuyer looking to purchase in London but the prices are out of your range
  • A shared owner who wants to move
  • A member of the armed forces

If you fit any of the above descriptions, you may be eligible for a Help to Buy scheme. The amount you can borrow with Help to Buy is different for each initiative.  

Once you know the maximum mortgage you can take out, you’ll have a clearer idea of whether you need a little extra help and if a Help to Buy scheme would benefit you. Use our free Mortgage Borrowing Calculator to find out what size mortgage is currently within your range.


What Help to Buy Schemes are Available?

The main Help to Buy schemes are:

  • Help to Buy Equity Loan
  • London Help to Buy
  • Help to Buy ISA 
  • Help to Buy Shared Ownership

We explain the various Help to Buy schemes, who they’re for and the eligibility requirements below. 

Help to Buy: Equity Loan

Who’s eligible? First-time buyers and homeowners looking to move 
What’s the property type? New build properties
What’s the property value? Up to £600,000 in England and £300,000 in Wales
How much can you borrow? A maximum of £120,000. There’s no minimum
How much deposit will you need to put in? At least 5%

About the Scheme 

The Help to Buy Equity Loan scheme is an initiative whereby the government lends you up to 20% of the property purchase price. You make up the remaining 80%.

You’re only eligible for this scheme if the 80% you provide is made up of both a mortgage and cash contribution.

You must:

  • Provide at least a 5% cash deposit
  • Take out a mortgage for at least 25% of the value of the property you want to purchase

The ratio between deposit and mortgage doesn’t matter, as long as it meets the minimum requirements. This means you could provide a 5% cash deposit, receive 20% in equity loan and take out a 75% mortgage, or provide 30% in cash deposit, receive 20% in equity loan and take out a 50% mortgage, etc.

Example

  • You want to purchase a £600,000 new build property in England
  • The deposit required is 20% of £600,000 = £120,000
  • You have £30,000 in savings which covers a 5% cash deposit of the £600,000 property
  • The maximum Help to Buy Equity Loan you can receive is 20%
  • 20% of £600,000 = £120,000
  • You take out a 75% mortgage for the remainder
  • Your mortgage value is 75% of £600,000 = £450,000
  • The full purchase price is: £120,000 + £30,000 +£450,000 = £600,000

How Do the Repayments Work?

The government loan won’t accrue interest for the first 5 years that you own your new build property. You start paying a monthly management fee of £1 per month from the time you take out your loan, however you don’t start paying back the amount borrowed until you reach your 6th year. You start paying interest at a rate of 1.75%. This will rise annually by the increase in the RPI plus 1% of the RPI.

Example

Year in HomeInterest Free Percentage
10%
20%
30%
40%
50%
61.75%
71.86%
81.97%

You can pay back the Equity Loan early as long as each chunk you repay is at least 10% of the property’s current value. This is often called “staircasing”. If you staircase or want to repay in full then you have to repay any interest due at that time.

Your Help to Buy scheme ends when you’ve paid off the whole loan and interest.

How Do I Apply?

There are government appointed agents who run the Help to Buy Equity Loan scheme. You can speak to them about applying for the loan. See the Help to Buy website to find your local agent.

You can also ask about the scheme at new build developments where you see the Help to Buy logo.


Help to Buy: London

Who’s eligible? First-time buyers and home movers looking to buy in a London borough
What’s the property type? New build properties
What’s the property value? A home worth up to £600,000 in England
How much can you borrow? A maximum of £240,000. There’s no minimum
How much deposit will you need to put in? At least 5%

About the Scheme

The London Help to Buy scheme works similarly to the Help to Buy: Equity Loan. The main difference is that the government will lend you up to 40% of your property’s purchase price, rather than 20%.

To qualify, you still need to provide at least 5% in deposit, but you can provide more in cash contribution if you’re able to. You’ll also need to take out a first charge mortgage for at least 25% of the property’s value. Together, your mortgage and cash contribution must make up 60% of the full market value – the other 40% would then be covered by the equity loan.

How Do the Repayments Work?

Paying back your London Help to Buy loan is no different from paying back the Help to Buy: Equity Loan. The process is the same, as are the interest rates and staircasing conditions.  The loan doesn’t carry fees or interest for the first 5 years of owning your home, and, like the equity loan, you’ll start paying interest on the government loan in your 6th year. 


Help to Buy: ISA

Who’s eligible? First-time buyers
What’s the property type? Any residential property, not necessarily a new build
What’s the property value? Up to £250,000 in England outside London and £450,000 in London
How much can you receive? A maximum of £3,000 and minimum of £400
How much deposit will you need to put in? Up to £1,200 to open your account and an additional £400 to claim the minimum bonus

About the Scheme

The Help to Buy: ISA can help you save towards the deposit on your first home. You put up to £200 into your ISA savings account every month. The government then top up your savings by 25%. For every £200 you save each month, the government will contribute £50. This is up to a maximum total of £3,000 on savings of £12,000. Although the maximum amount you can pay into your Help to Buy: ISA each month is £200, you're allowed to make an additional contribution of £1,000 when you first open the account, which means you can save £1,200 in the first month.

The government bonus is only paid when you buy a property, so you won’t get the 25% if you use the money for something else. The money you save in the Help to Buy: ISA isn’t limited to new build homes; it’s on any residential property below a certain value.

How Do the Repayments Work?

You don’t repay the Help to Buy: ISA. It provides help for first-time buyers struggling to save a deposit. The scheme ends when you – or your solicitor – claims the bonus between exchange and completion, i.e. when you use the money the purchase your property.

How Do I Claim a Help to Buy: ISA?

To be eligible for a Help to Buy: ISA you need to be a first-time buyer. It’s worth speaking with your existing bank or your local building society to see if they back the scheme and who can offer you the best overall rate.


Help to Buy: Shared Ownership

Who’s eligible? First-time buyers, previous homeowners and existing shared owners
What’s the property type? Newly built, or existing, leasehold properties available through shared ownership

About the Scheme

The Help to Buy: Shared Ownership scheme works differently from the other Help to Buy schemes. You don’t receive money. Instead, you buy a share of your home: between 25% and 75% of its value. You then pay rent on the remaining share.

You may be eligible if:

  • Your household earns £80,000 or less outside London
  • Your household earns £90,000 or less a year in London
  • You’re a first-time buyer, you used to own a home but can’t afford one now or you’re an existing shared owner who wants to move

Armed Forces Help to Buy – What’s the Difference?

Forces Help to Buy is a government scheme designed to help regular armed forced personnel. It gives men and women in the armed forces extra help, so they can buy their first home or move to another property.  The unique aspect of the Forces Help to Buy scheme falls on how you borrow the money.

Servicemen and servicewomen can borrow up to 50% of their salary to use towards a deposit and other costs, such as solicitor’s and estate agent’s fees. The maximum amount you can borrow is £25,000 and you pay no interest.

To apply, you must:

  • Have completed the pre-requisite length of service
  • Have at least 6 months left to serve
  • Meet the right medical categories

If you have extenuating circumstances which stop you from meeting the above criteria, you may still be eligible. The government offer some flexibility in certain situations. You can seek advice on your application through your Chain of Command and personnel agency.


What’s the Maximum Help to Buy Amount You Can Borrow?

The maximum amount you can borrow through a Help to Buy scheme depends on which schemes you’re eligible for.

However, first-time buyers who fit certain criteria can claim the most money through Help to Buy. They’re the only group eligible for the Help to Buy: ISA, which can be used with other Government housing schemes, including the Help to Buy: Equity Loan.


What’s the End Date for Help to Buy?

The Help to Buy: Equity Loan is set to run until 2021. A new Help to Buy: Equity Loan scheme, restricted to first-time buyers, will run until March 2023.

You’ll be able to open a new Help to Buy: ISA until 30th November 2019. If you open your ISA before this date, you’ll be able to keep saving until 2029. 

The Forces Help to Buy scheme will allow new applications until 31st December 2019.


Is Help to Buy Worth It?

The Help to Buy schemes have certainly helped thousands of people who wouldn’t have otherwise been able to get on the housing ladder or own a property. However, whether Help to Buy is the best option for you really depends on your unique circumstances.

Still unsure? Speak with one of our mortgage advisers on 0344 346 3672. They’ll explain how it works in a little more detail and go through the options that best suit you.

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