If you're finding it hard to get on the housing ladder, you may be able to get help from the government’s Help to Buy mortgage scheme.
Compare a huge range of first time buyer mortgages on our comparison tables
Find out if you meet the criteria for a Help to Buy mortgage and learn more about the UK government's homeownership scheme.
In this article we consider:
Who's eligible for a Help to Buy mortgage? - There are a variety of requirements you must meet to get Help to Buy
What are the alternatives to Help to Buy? - Help to Buy isn't the only way to get help buying a home
The government introduced the Help to Buy scheme to improve people’s chances of owning property in England. There are similar schemes available in Wales and Scotland.
Coupled with low mortgage interest rates, the scheme has been taken up by many first-time buyers and people wanting to move.
Since April 2013, first-time buyers of new build properties need a deposit of only 5% in order to get a mortgage for up to 75% of the property’s value.
You can compare the current Help to Buy mortgage market with our online mortgage comparison tool.
Big increases in house prices and lower wages have made it difficult for many people to buy their first home or move to a bigger home.
Several years ago the government introduced the scheme to encourage first time buyers to purchase new build homes. To help them get on the housing ladder they offered a loan, a mortgage or shared ownership.
The scheme was later expanded to include home movers and people buying properties that were not new-builds.
There had been proposals to scale back the scheme in 2021 and restrict it to first time buyers only. However, due to Covid-19 it's likely that these restrictions will be delayed because many people have been unable to view, buy or arrange a mortgage during lockdown.
In order to benefit from the Help to Buy scheme you have to meet certain criteria.
There are two parts to the Help to Buy scheme, which are explained below. The one you choose will depend on what help you need and your personal financial circumstances.
With this scheme you can buy as little as 25% or as much as 75% of a new or existing home and pay rent on the rest. For your part of the property you will need to use a mortgage or savings to buy your share.
You pay rent on the remaining share. As you save up money, you can buy a bigger share in your house.
You qualify for Help to Buy: Shared Ownership in England if your household earns £80,000 a year or less (£90,000 a year or less in London), or you're a first-time buyer, or you used to own a home but cannot afford to buy one now or are an existing shared owner looking to move.
This scheme makes it possible to buy a new home with just a 5% deposit. This is a help to people who are struggling to save a big deposit in order to qualify for an ordinary mortgage.
The government lends you up to 20% (40% in London) of the price of the property you want to buy. You will need to have a 75% LTV mortgage to make up the rest.
For example, a £10,000 deposit could help you purchase a home worth up to £200,000. This breaks down into a 5% deposit (£10,000), 20% for the government loan (£40,000), and 75% for the mortgage (£150,000).
|Property value: £200,000||Amount||Percentage|
In London a 40% Help to Buy loan is available, so using the average property prices for London:
|Property value: £500,000||Amount||Percentage|
You don't have to be a first time buyer to qualify, but you do have to buy a new-build property valued at under £600,000. With the Equity Loan scheme, you own your home rather than just a share in it. The benefit of this scheme is that the government doesn't charge fees on the 20% loan for the first five years of owning your home.
In the sixth year, you’ll be charged a fee of up to 1.75% of the loan’s value. After this, the fee will increase every year in line with the Retail Price Index, plus 1%. The equity loan must be repaid after 25 years, or earlier if you sell your home.
Equity loans are available to first time buyers as well as to homeowners looking to move. They are available only to people who do not own any other properties.
The Help to Buy scheme had been scheduled to finish in March 2023. The plan was to scale back the scheme by implementing a new version of Help to Buy from April 2021 until March 2023.
The proposals were to restrict the scheme to first time buyers and cap the maximum price of a new-build home that can be bought with Help to Buy in any region.
However, the government is now considering extending the Help to Buy scheme for another couple of years, due to the difficulties people have experienced due to Covid-19.
This would help people who have signed up for the scheme but have been unable to move because of the lockdown.
You can use a mortgage calculator to see how much you could borrow.
With a Help to Buy: Equity Loan, you will own your home, which means you can sell it at any time. When you sell your home you will have to pay back the equity loan. If you want to pay off the loan in full, you can speak to your Help to Buy agent to see if this is possible.
It's important to note that all applications are subject to credit checks and stress tests, and each mortgage lender will have its own terms relating to who is eligible. So if you are turned down by one lender you may be accepted by a different one with alternative criteria and scoring processes.
You will need a minimum 5% deposit of the property’s value
The property value cannot exceed £600,000
You may need to secure up to 80% mortgage from the lender (but 75% for first-time buyers and new-build properties)
A clean credit history and proof you can afford repayments is still critical – those with county court judgments from three years prior to the application will be barred
Help to Buy is available only in England
Overseas buyers with no history of UK home ownership will not be allowed to take up the scheme
You cannot take up Help to Buy in conjunction with other government home ownership schemes, such as NewBuy
A mortgage with a 5% deposit: Getting your first home can be easier with Help to Buy, but it's worth checking out the 95% LTV mortgages available. There are a number of lenders who will offer you a mortgage if you have a deposit of only 5% . However, interest rates may be higher, and the best deals are available to people who have saved up 25% of the purchase price of the property.
Shared ownership schemes: These are provided through housing associations and aim to give people a better chance of home ownership by allowing them to purchase a share of the home.
While Help to Buy is not valid in Scotland, there is a similar shared ownership scheme available there.
Like in England, the scheme allows people to purchase a 25%, 50% or 75% stake in a property owned by a housing association. They then pay rent on the remainder and have the option of purchasing 100% of the property.
Homebuy scheme: In Wales, the Homebuy scheme offers an equity loan of around 30% of the property value but is mainly intended for people who would otherwise require social housing.
NewBuy scheme: The NewBuy scheme, like Help to Buy, requires only a 5% deposit. However, NewBuy is valid only on newly built homes by builders taking part in the scheme.What about the Help to Buy ISA?
You can no longer open a new Help to Buy ISA. If you already have one you can continue to save into it until November 2029. The scheme meant that people received a boost of 25% to their savings from the government.
So for every £200 you saved, you received a government bonus of £50. The maximum government bonus you can receive is £3,000.
The Help to Buy ISA has been replaced by the Lifetime ISA (LISA), which is designed to either help people get on the property ladder or boost their retirement savings.
The government will top up what you invest with an additional 25% bonus. In other words, for every £4 you save, the government will add £1.
You are limited to investing a maximum of £4,000 each tax year. (That amount counts towards your overall £20,000 allowance.)