Support from the government backed Help to Buy initiative is available for first time buyers and to existing homeowners who are finding it difficult to move further up the housing ladder.
If you are looking to make the dream of owning your own home a reality, or are looking to move from your existing property but are struggling to save enough for a deposit, Help to Buy could make this happen with as little as a 5% deposit.
Who is Help to Buy for?
If you feel a mortgage is affordable but are struggling to save a deposit, Help to Buy can speed up the process of saving and make you a more attractive, safer option for mortgage providers to lend money to.
To be eligible for the Help to Buy Scheme you must have:
- Saved a deposit of at least 5%
- Be looking to buy a home worth £600,000 or less - a limit of £450,000 applies to the Help to Buy Isa
- Be purchasing a property that you intend to live in most of the time – you can’t use the scheme to buy a second home or buy to let property
What Help to Buy Schemes are available?
There are three main Help to Buy options, the Help to Buy Equity Loan, Help to Buy London and the Help to Buy ISA. Below we explain the various schemes and look at who they are for and what the eligibility requirements are.
Help to Buy Equity Loan
Who can do it: First-time buyers and home movers with a 5% deposit.
House price: A home worth less than £600,000 in England and £300,000 in Wales
Property type: New build
What is it?
The government lends first-time buyers and existing home owners 20% of the deposit towards a newly built property. As a minimum you would need to put in 5% of the deposit and be able to arrange a mortgage of 75% mortgage of the overall cost of the property to qualify. The government loan won’t carry fees for the first five years of owning your home. But in year six you start paying interest. You can repay the loan in full at any time while you're living in the house but it has to be repaid in full after 25 years (if you're still there). If you sell the house sooner, you'll have to repay the loan when you move.
How do I apply?
To apply for a Help to Buy equity loan you will need to purchase a property through a registered Help to Buy house builder.
Help to Buy London
Who can do it: First-time buyers and home movers looking to buy in a London Borough with a 5% deposit
House price: A home worth less than £600,000
Property type: New build
What is it? The government lends first-time buyers and existing owners 40% of the deposit towards a newly built home. As a minimum you would need to put in 5% of the deposit and be able to arrange a mortgage of 55% of the overall cost of the property you want to purchase. The loan doesn’t carry fees for the first 5 years of owning your home. But, as with the equity loan in year six you’ll start paying interest on the government loan.
You can repay the loan in full at any time while you're living in the house but you must do it after 25 years if you're still there. If you sell the house sooner, you'll have to repay the loan when you move.
How do I apply? To apply for a London Help to Buy equity loan you will need to purchase a property through a registered Help to Buy house builder.
Help to Buy ISA
The Help to Buy ISA can help you save towards the deposit on your first home. Under this scheme the government will top up your savings by 25%. For every £200 you save each month, the government will contribute £50 up to a maximum of £3,000 on savings of £12,000. The maximum amount you can pay into your Help to Buy Isa each month is £200 but, as a bonus, when you first open the account you're allowed to make an additional contribution of £1,000, meaning you can save £1,200 in the first month.
Unlike the other Help to Buy schemes the ISA is only available for first-time buyers. So you won’t be able to open one if you currently own a property or have owned one in the past. The government bonus is paid only when you buy a property, so you won’t get the 25% top-up if you use the money for something else. You can use the Help to Buy ISA to purchase a property worth up to £250,000 - or, if you're buying in London, £450,000. The money you save in the Help to Buy ISA isn’t limited to new build homes.
How do I get 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.