A guide to the Help to Buy scheme

Find out if you are eligible for the equity loan program

A guide to the Help to Buy scheme

What is Help to Buy?

A government-backed scheme, Help to Buy helps first-time homebuyers get into the property market by providing eligible buyers with an equity loan, or shared equity, of as high as 20% of the value of a new build home. The homebuyer only needs to raise 5% since the government pitches in the 20% loan. A 75% mortgage comprises the rest of the cost. 

The UK government increased the limit of the equity loan to 40% for homebuyers in London to reflect the high property prices in the capital. The UK government provides a 40% loan for the London Help to Buy, but buyers are only required to raise a 5% deposit. In this structure, a 55% mortgage makes up the remainder.

Why buy a Help to Buy home?

The Help to Buy scheme will make getting a home more accessible to some homebuyers, due to the reduced costs needed for the deposit, especially if you can compare it to buying a home on the open market. Another benefit to a Help to Buy home, which essentially is an equity loan from the UK government, is that, thanks to the bigger amount you put down, you will usually qualify for a more desirable mortgage rate for the lender. In other words—you benefit in two ways.

Who is eligible for the Help to Buy equity loan?

You are eligible for the Help to Buy equity loan if you fall into the following categories:

  • You are a first-time homebuyer, which means you haven’t owned a property in the UK or abroad. If you are buying the property with another person, you both have to meet this definition of a first-time homebuyer to benefit from the scheme;
  • You are at least 18 years of age;
  • Even though there is no maximum or minimum income bracket, you have to be able to pay for 60% in London or 80% elsewhere of the purchase through the combination of mortgage and deposit;
  • You can pay at least 5% deposit of the entire cost of the home;
  • The value of the home you are buying cannot be more than the regional price cap for your area;
  • You can prove that you are able to afford the mortgage repayments and any other outgoings on the property you want to purchase;
  • You are unable to sublet your home to buy property; and
  • Part exchange is unavailable through home to buy scheme.

Help to Buy and Shared Ownership: what’s the difference?

The differences between Help to Buy and shared ownership are significant. The key difference between the two is that with the Help to Buy scheme, you buy and legally own 100% of the property. With a shared ownership scheme, on the other hand, you can buy a share of a home (most often somewhere between 25% to 75%) and pay off the mortgage on the portion you own only and subsidizing rent to your provider on the remainder. The buyer then has the option to purchase more shares, in a process that is called staircasing.

The deposit you place in a help to buy scheme, it should be noted, typically includes a sizeable portion of the equity loan that makes up the difference between the purchase price and the mortgage. The deposit on a shared ownership property, however, is between 5% and 10% of the share you are buying, rather than the full market value of the property.

Shared ownership is usually offered by housing associations while Help to Buy is typically provided by housebuilders, though there are a number of housing associations that also offer homes through Help to Buy schemes.

Does Help to Buy make it easier for me to buy a property?

It is possible that a Help to Buy scheme would make it easier for you to buy a property if you can prove that you can afford the mortgage payments, that you have minimum 5% deposit saved, and meet the provider’s lending conditions. It should be noted that the provider’s lending conditions do vary between lenders.

How long will the help to buy scheme run for?

The Help to Buy scheme started on December 16, 2020, and will run up to March 31, 2023. The Help to Buy scheme is open to first-time homebuyers and must follow regional price caps.

LATEST NEWS