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. It's designed to assist people to get a mortgage and buy their home.
Find out if you meet the criteria for a Help to Buy mortgage and learn more about the UK government's homeownership scheme.
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- Am I eligible for a Help to Buy mortgage?- There are a variety of requirements you must meet to get Help to Buy
- Alternatives to Help to Buy- Help to Buy isn't the only way to get help buying a home
- 95% LTV mortgages vs Help to Buy mortgage guarantee- Choosing between a high LTV mortgage and Help to Buy, what is better?
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.
What is a Help to Buy Mortgage?
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 build.
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 now be delayed because many people have been unable to view, buy or arrange a mortgage during lockdown.
Am I eligible for the Help to Buy scheme?
In order to benefit from the Help to Buy scheme you have to meet a 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.
What is the Help to Buy scheme?
The government introduced the Help to Buy scheme to improve people’s chances of owning property in England, although 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 will only need a deposit of 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.
There are two parts to the Help to Buy scheme – shared ownership and an equity loan. You can choose which option suits your homebuying plans best.
Help to Buy: Shared Ownership
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.
Help to Buy: Equity Loan
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 up a big deposit in order to qualify for an ordinary mortgage.
How does the Help to Buy: Shared Ownership scheme work? This is designed to help people buy a share of their home. The option is to buy between 25% and 75% of the home’s value using a mortgage or with your savings.
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.
How does the Help to Buy: Equity Loan work? With the loan the government lends you up to 20% of the property you want to buy. You will need to have a 5% cash deposit and a 75% mortgage to make up the rest.
You don't have to be a first time buyer to qualify, but you do have to buy a new build property, which is valued at under £600,000. 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 homeowners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000. It is only available to people who do not own any other properties.
Using the Help to Buy scheme, first time buyers can get a loan worth up to 20% of the property’s value (40% in London). This leaves you only needing to pay a deposit of 5%, if you can get a mortgage covering 75% of the property’s value.
For example, a £10,000 deposit, could help you purchase a home worth up to £200,000. This breaks down into 5% for the deposit (£10,000), 20% for the government loan (£40,000), and 75% for the mortgage (£150,000).
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|Property value: £500,000||Amount||Percentage|
The benefit of using a government loan is that there are no loan fees for the first five years of owning your home.
How has Covid-19 affected the Help to Buy scheme?
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 the Help to Buy scheme from 1 April 2021 until 31 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 Coivd-19.
This could see the scheme being kept for another couple of years and would help people who had signed up for the scheme but had been unable to move because of the lockdown.
How can I find out how much I can afford to borrow?
You can use our mortgage calculator to see how much you could borrow.
Selling your home after the Help to Buy scheme
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.
Getting your first home can be easier with Help to Buy but it's worth checking out the 95% LTV mortgages available
It's important to note that all applications are subject to credit checks and stress tests, and each mortgage lender will have their 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
- You must be a first time buyer
- Help to Buy is only valid 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 only have a 5% deposit. 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 the housing association. They then pay rent on the remainder and have the option of purchasing 100% of the property.
Homebuy scheme: Meanwhile, 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: There is also the NewBuy scheme, which, like Help to Buy, only requires a 5% deposit. However, NewBuy is only valid on newly built homes by builders taking part in the scheme.
Many banks and building societies have been offering 95% LTV mortgages long before the introduction of the mortgage guarantee scheme, which in effect offers a similar benefit as the second phase of the Help to Buy scheme.
This benefit in a nutshell: put down a 5% deposit and the bank will loan you the rest. However, the advantage of Help to Buy is that the banks will be, in theory, more willing to lend you that money as 15% of the loan will be guaranteed by the government.
This may, again in theory, mean you can get preferential rates than if you went straight for a 95% mortgage.
- 100% LTV Mortgages
- 95% LTV Mortgages
- 90% LTV Mortgages
- 85% LTV Mortgages
- 80% LTV Mortgages
- 75% LTV Mortgages
- 70% LTV Mortgages
- 65% LTV Mortgages
- 60% LTV Mortgages
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 30 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.
Can I use a Lifetime ISA to help me save a deposit?
The Help to Buy ISA has now 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).