Help to Buy

Originally there were three parts to the Help to Buy scheme:

• Mortgage Guarantee - for people buying new build properties or homes that are already lived in
• Equity Loan - available only on new build properties
• Help to Buy ISA - a scheme introduced to help people save towards their first home.

Help to Buy: Mortgage Guarantee

The Mortgage Guarantee scheme, which aimed to help buyers with a 5% deposit by enabling lenders to offer more 95% LTV mortgages, finished at the end of 2016, but relaunched in April 2021. The Government provides lenders with a guarantee on the mortgages offered, meaning that it will cover some of the lender’s losses if the borrower defaults on a mortgage within the first 7 years of buying their home. Currently the scheme is due to finish on 31st December 2022.

Help to Buy: Equity Loan mortgages

When it first launched, the Help to Buy Equity Loan scheme enabled buyers to secure a Government loan alongside a mortgage and 5% deposit in order to buy a new build home costing up to £600,000. There was no maximum income requirement, which meant that even those on high salaries could apply. Under the scheme, if you lived in England, you needed to put down a 5% deposit on a property being sold by a builder who’d registered for the scheme. The government lent a further 20% of the property price interest-free for the first five years. That meant buyers only needed a mortgage for the remaining 75% of the property price, reducing the amount they’d have to pay each month. After the five-year interest-free period finishes, buyers are charged interest on their loans from the government at 1.75%. The interest rate increases every year by the rate of inflation, as measured by the Consumer Prices Index (RPI) plus another 2%. Help to buy loans can be repaid at any stage, but must be paid off within 25 years, or when the homeowner moves. .

How the last version of the Help to Buy equity loan scheme worked

The final version of the Help to Buy equity loan scheme, introduced in April 2021, was only available to first-time buyers, who could purchase properties up to the value of new regional price caps, shown below, using a 5% deposit. New Help to Buy regional property price caps (Price cap for properties eligible for Help to Buy Equity Loan scheme from April 2021 to March 2023) Region Cap North East £186,100 North West £224,400 Yorkshire and The Humber £228,100 East Midlands £261,900 West Midlands £255,600 East of England £407,400 London £600,000 South East £437,600 South West £349,000 Source: HM Treasury analysisLike the previous scheme, the government lent up to 20% of the property price interest-free for the first five years, with the same rate of interest payable after this. The latest scheme closed to applications at the end of October 2022, and buyers have until the end of March 2023 to complete their property purchases. Buyers in London could apply for a government loan worth up to 40% of the property price. Once they’d put down a 5% deposit, this means they only needed a mortgage for 55% of the property price. As with the Help to Buy scheme outside the capital, the loan is interest-free for the first five years, but in year six buyers are charged 1.75%. After that the fee increases by 2% plus any increase in the Consumer Prices Index measure of inflation. Even if the CPI falls, the equity loan portion of the mortgage will still attract a loan fee of at least 1%. here

Help to Buy repayment

Help to Buy mortgages were set up to work in the same way as other mortgages, with buyers making monthly repayments for a set term until their mortgage is paid off or their home is sold. Those who signed up for the scheme only have to pay an admin fee of £1 a month for the equity loan for the first five years. After that, interest fees are equivalent to 1.75% of the loan. This increases every year based on the rate of inflation, as measured by the Consumer Prices Index (RPI), plus another 2%. If you want to pay back some or all of the loan early, the minimum repayment you can make is 10% of the property’s current value. You’ll need to pay to have the property independently valued by a surveyor to work out how much you’ll need to repay. There may also be an administration fee to pay, usually around £200, which is payable when you pay back some or part of your Help to Buy equity loan.  

Was Help to Buy only for new builds?

Yes, the equity loan part of Help to Buy only applied to new build properties costing up to £600,000, so if you wanted to buy an older property, you wouldn’t be eligible for this part of Help to Buy.  

Was Help to Buy worth it?

The Help to Buy equity loan proved really useful for many first-time buyers who otherwise would have found it impossible to build up more than a 5% deposit. Help to buy equity loan mortgage rates were generally competitive too, helping keep monthly payments down. There were of course constraints, such as only being able to use the scheme to purchase a new build home, so it wasn’t right for everyone. Now that the scheme is closed to applications, it’s important to remember that there are other options available for first-time buyers, such as 95% mortgages and guarantor mortgages, so it’s worth seeking expert advice to see either of these options could work for you.  

Scotland Help to Buy scheme

The Help to Buy (Scotland) Affordable New Build scheme was available for new build homes costing up to £230,000 for purchases which completed on or before the end of March 2017, £200,000 for purchases completed before the end of March 2018 and £175,000 for purchases completed before the end of March 2019. The scheme ended in March 2022. The Scottish Government provided an equity stake of up to a maximum of 15% of the value of the property, so buyers needed to contribute a deposit of around 5% of the property purchase price. The mortgage and deposit combined had to be at least 85% of the total purchase price. To qualify for the scheme, buyers had to take out a mortgage from a lender participating in the scheme. The mortgage needed to be arranged on a repayment rather than interest-only basis, and had to be for a minimum of 25% of the property price. Buyers weren’t eligible for the scheme if they were able to afford to buy a home without the Government having an equity share in the property. They also didn’t qualify if they were buying alone and needed a mortgage of more than 4.5 times their income, or 3.5 times their income if buying as a couple.  

Wales Help to Buy Scheme

If you’re buying in Wales, you may be eligible for the Wales Help to Buy scheme. To qualify, you’ll need to have a 5% deposit, and be purchasing a new build property costing up to £250,000. The last date for home-buyers to reserve a new home with Help to Buy Wales is Friday 31st March 2023, and final Help to Buy reservations must be legally complete by 22nd December 2023. The Welsh Government will provide a shared equity loan for up to 20% of the property purchase price, and the remaining balance will need to be covered by a mortgage. You’ll only have to pay an admin fee of £1 a month for the equity loan for the first five years. After that, in the sixth year, you’ll be charged interest at 1.75% a year of the original equity loan amount, as well as the £1 monthly management fee. In subsequent years, the interest will increase by the same amount as the Consumer Price Index measure of inflation, plus 2%.

Our mortgage advisers are happy to answer any questions you have on mortgages and schemes to help first-time buyers and those with small deposits. There's no obligation and no charge for our service.   ⁠