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Help to Buy mortgages

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What are Help to Buy mortgages?

Help to Buy mortgages are specifically for people buying a home through the Help to Buy scheme, so you’ll need one of these if you’re using the scheme. Whilst the actual scheme closed to new applicants in England on October 31st 2022, you’re still able to take out a Help to Buy mortgage if you met the application deadline and have an equity loan, until the scheme closes completely in March 2023.

Help to Buy Wales is still available to new applicants until 31 March 2023, so if you’re looking to buy a home in Wales, act quickly to take advantage of this scheme.

How do Help to Buy mortgages work?

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Once you’ve found a home you want to buy through the Help to Buy scheme and have been approved for an equity loan, you can apply for the mortgage you need with a lender. Help to Buy mortgages work in the same way as standard mortgages and can have an initial fixed or variable rate.

You can compare the current Help to Buy mortgage market with our online mortgage comparison tool.

If you’re in England, you must have submitted your application before 31st October 2022 in order to be able to get a Help to Buy mortgage. The Help to Buy schemes in Scotland and Northern Ireland are also closed.

Unfortunately if you have not yet applied for Help to Buy, this type of mortgage won’t now be available to you in England. However, there are a number of other options to help first-time buyers get onto the property ladder, see our ‘Alternatives to Help to Buy’ below.

What is the Help to Buy scheme?

The Help to Buy Equity Loan Scheme is a way for first-time buyers who would otherwise not be able to afford to buy a home of their own to get on to the property ladder. Under the Help to Buy equity loan scheme, first-time buyers can buy a new build property with a deposit of just 5%. 

You get an equity loan from the government of up to 20% of the property’s value and a repayment mortgage for the rest of the cost of your home. If you sell your home before you have completely repaid the equity loan, you have to pay back the same percentage of the value of your property, even if it is now worth more or less than it was when you bought it.

You don’t have to pay interest on the equity loan for the first five years. But in year six, you start paying interest at 1.75% based on the amount you originally borrowed. The interest rate then increases in April each year after that. You can pay some or all of the loan back at any time.

Property value£200,000
Cash deposit£10,0005%
Government loan£40,00020%

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Alternatives to Help to Buy

Although the Help to Buy scheme is now closed to new applicants in England, there are a range of other schemes available around the UK to help you buy a home, such as:

First Homes Scheme

First Homes is a scheme available in England, that lets you buy a new build home for 30% to 50% less than its market value. To qualify you must be a first-time buyer, able to get a mortgage for at least half the price of the property, and have a household income of £80,000 or less (£90,000 in London).

There are other criteria to meet in order to qualify for the scheme, and those who are key workers, on a low-income, or have links to the local area of the scheme properties are likely to be prioritised.

Homebuy scheme

In Wales, the Homebuy scheme offers an equity loan of around 30% of the property’s value. You pay for the remaining 70% using a mortgage or savings. It’s intended for people who qualify for social housing and can’t afford to carry on living in their current home or are in a home that doesn’t meet their needs.

Deposit Unlock Scheme

The deposit unlock scheme is a non-governmental scheme which has been developed by the HomeOwners Alliance. It also differs in that it’s open to both first-time buyers and home movers, so long as they meet the criteria of the deposit unlock scheme.

Deposit unlock allows applicants to buy a new build home (which typically require higher deposits than older properties) with just 5% deposit. The maximum property price is set to £750,000 nationwide, so it could also be helpful for those people looking to buy a higher cost home both in and outside of London. 

There are currently only a handful of lenders participating in this scheme, but there are a great deal of property developers signed up, and more mortgage lenders are expected to join as the Help to Buy scheme continues to be phased out. 

Shared ownership mortgages

Shared ownership also sits under the banner of the wider Help to Buy scheme, however, this scheme has been available in one form or another for many years, and there is no sign it will end before 2026 at the current time. 

This government backed scheme allows buyers to purchase a percentage of their home and rent the remainder from a housing association. You can opt to buy anything between 10-75% initially and pay rent on the percentage that you don’t own. In most cases you can increase ownership until you own the property outright. 

As you are only buying a chunk of a property, rather than the whole thing, the amount you will need to qualify for a mortgage for, and the deposit for that mortgage, will be much lower than a typical home purchase. This makes it much easier to get a mortgage.

Who is eligible for a Help to Buy mortgage?

You can only apply for a Help to Buy mortgage if you meet the eligibility guidelines for the Help to Buy scheme. You will also have to satisfy the mortgage provider’s lending criteria and have a good credit rating in order to qualify for a Help to Buy mortgage.

If you’re still looking to apply in Wales, the criteria for the Help to Buy Wales scheme can be found on their website.

  • It helps you to buy a first home when you otherwise wouldn’t be able to afford to

  • You can buy a home with a deposit of as little as 5% of the property’s value

  • As you only need a mortgage of 75% or less of the value of the property (also known as 75% LTV  - loan to value), you will be able to access more competitive interest rates from mortgage lenders

  • You don’t have to pay interest on the equity loan for the first five years

  • You can only buy a new build home, not an existing one, which limits your choice

  • There’s a limit to how much the property can cost, in Wales this is £250,000

  • You have to pay interest on the equity loan after five years, and the rate increases each year

  • How much you repay on the equity loan will depends on the value of the property at the time, so if the price of your home rises, you will pay back more than you borrowed

Claire Flynn - Senior Mortgages Editor at Uswitch
quotation mark

Help to Buy is a useful, government-backed way to improve your mortgage options and most lenders will be able to help you if you’re after a mortgage using Help to Buy. Although the scheme is coming to an end soon so you'll have to act quickly to take advantage of it. ”

Claire Flynn

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