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Help to Buy mortgage guide

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HomeFirst Time BuyersHelp to Buy mortgage guide

Help to Buy mortgage guide

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Last reviewed on 27th September 2021

Help to Buy is a government scheme that aims to help first-time buyers get a property with a 5% deposit. The government will then provide you with an equity loan of up to 20% (40% in London), with the remainder being a Help to Buy mortgage.

This means that you’ll only need a 75% mortgage to buy a newly built home, or a 55% mortgage if you’re buying in London.

The goverment loan is interest-free for the first five years. After this period, you’ll be charged 1.75% interest, with the rate increasing each year.

Although Help to Buy is offered in England, there are separate schemes in Scotland, Wales and Northern Ireland. As a result, the way Help to Buy mortgages are offered will also vary.

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How does Help to Buy work?

The Help to Buy scheme will boost your 5% deposit into a 25% deposit. This is because you can borrow up to 20% of the property price. If you’re buying a home in London, Help to Buy can boost your deposit to a staggering 45%.

There are conditions for using the Help to Buy scheme, such as:

  • The property must be a new-build
  • Maximum purchase price of £600,000 in England (or £300,000 in Wales)
  • It must be the only home you own
  • You must be a first-time buyer (from April 2021 – March 2023)
  • Can only be used for residential purposes (not sub-let or rented out)
  • You’ll require a minimum 5% deposit
  • You must buy your home from a registered Help to Buy builder

It’s important to note that this is a loan and the government do expect this to be repaid in addition to your mortgage.

Do I qualify for a Help to Buy mortgage?

To qualify for a Help to Buy mortgage, you first need to decide on the scheme you’re going to use.

Currently, there’s two Help to Buy schemes to choose from:

Each Help to Buy scheme has its own conditions, so you need to be sure the scheme you’ve chosen is suitable.

For instance, an equity loan will only allow you to purchase a new build home, whereas shared ownership will only allow you to buy a share of your home.

Help to buy calculator

Use our Help to Buy mortgage calculator to check how much you’re able to borrow.

Help to Buy: Shared Ownership

The shared ownership scheme is available in England and helps buyers where they’d otherwise struggle to buy the full share of a property. As a result, you’re able to buy a share of a home instead.

Shares are typically 25%, 50% or 75% but can be slightly more or less. You’d then pay rent on the remainder to your housing association.

Shared ownership may be better suited than an equity loan if you’re not buying a new build. Furthermore, if you feel as though a mortgage on 100% of a property will be too expensive, shared ownership may be something to consider.

The shared ownership scheme is also open to first-time buyers and home movers. You’ll also have to buy your home as a leasehold, rather than a freehold. That being said, you can buy more shares and eventually own the freehold of your property if you’re able to.

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How to apply for Help to Buy in London

The London Help to Buy scheme simply offers a 40% equity loan as opposed to 20%. This is because house prices in London are typically a lot higher when compared to the rest of the country.

You’ll still need a 5% deposit, but rather than a 75% mortgage, you’ll only need a 55% mortgage. That is if you qualify for the full 40% equity loan, in addition to having a 5% deposit.

Your property must also be a new build and can’t cost more than £600,000, very much like Help to Buy that’s outside of London.

One of the main advantages of having a Help to Buy mortgage in London is that you’re likely to be on a great rate. This is because your lender is only having to lend 55% due to your equity loan of 40% and your 5% deposit.

When does the Help to Buy scheme end?

The Help to Buy Equity Loan was introduced in 2013 and ran until March 2021. The government introduced the second phase of the scheme, which started on 1 April 2021 and will run until 31 March 2023.

The main difference is that now the scheme will only be open to first-time buyers.

There will also be a price cap per region on eligible homes:

  • London: £600,000
  • South East: £437,600
  • South West: £349,000
  • 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

Speak to a Help to Buy expert

If you’re unsure of whether you’ll qualify, you can speak to an expert mortgage advisor for information on the latest government schemes.

Our advisors also specialise in a wide variety of mortgage fields, such as help to buy with bad credit or Right to Acquire if you’re a tenant wanting to buy the home you rent.

Getting a mortgage for a new build is also far from straightforward. With so many options such as buying off-plan and buyer incentives, it helps to speak to an expert.

You can also speak to your local Help to Buy agent to check whether you qualify for the scheme. This is highly recommended before you attempt to apply for a mortgage. Our advisors can also check if you qualify for the scheme.

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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.