A Guide to Help to Buy Mortgages
The Help to Buy scheme was introduced in 2013 by the Chancellor of the Exchequer of the time, George Osborne. It was an extension of a previous programme called FirstBuy, aimed solely at first-time buyers.
Help to Buy has changed the way it operates over those years, with the current scheme accepting applicants since 2021, ending in March 2023.
What are Help to Buy mortgages?
The Help to Buy: Equity Loan scheme helps first-time buyers who only hold a small deposit and low LTV purchase a new-build property.
To help, the Government buys an equity stake in the property of between 5% and 20% of the total purchase price (up to 40% in London), reducing the amount you need to borrow as a repayment mortgage. As a result, the equivalent LTV value drops from 95% to 75% (60% in London), with partners to the scheme offering appropriate mortgages and interest rates to participants.
There isn’t any interest to pay on the Government’s equity share for the first five years, but you’ll continue to make interest payments until the loan balance is paid in full from year six.
The equity loan remains the same percentage whether the property's value rises or falls. So, if you borrowed 20% of the purchase property value, the cost will be 20% of the sale price or professional property valuation when you repay the loan.
The equity loan payments constitute interest only, so the amount remains at the initial percentage until paid off in part or in full. Part payments must be at least 10% of the property value.
Who is eligible for the Help to Buy scheme
The criteria for a Help to Buy: Equity Loan is fairly straightforward:
- Must be a first-time buyer aged 18 or older.
- The property must be a new-build home under the regional price cap, built by a registered Help to Buy: Equity Loan homebuilder.
- Applicants (sole or joint application partners) must not have owned a home, residential land, a shared home, or inherited a home in the UK or abroad, or be married or co-habiting with a partner who has.
- Must never have held sharia mortgage finance.
- Cannot buy a second home or property under the scheme.
- The property price must be within the regional price cap.
Regional price caps – April 2021 to March 2023
|Maximum property price
|Yorkshire and the Humber
|East of England
Paying the loan interest
For the first five years, the equity loan is interest-free.
From year 6:
- Participants pay a £1 monthly management fee
- Pay interest of 1.75% of the equity loan
- The interest rate will rise each additional year by the Consumer Price Index (CPI), plus 2%
- Interest is payable until the loan is repaid in full
Paying back the loan
You must repay the equity loan in full:
- At the end of the equity loan term
- When the repayment mortgage is completed
- If the property is sold
- If the terms of the loan contract are broken, and payment is requested
How to find Help to Buy properties for sale
There are three separate websites set up to manage the Help to Buy regions. Each has a property search facility, showing homes applicable to each government scheme by value, region, area, and other filters.
Alternatively, look for homebuilders with the Help to Buy logo on their website. You can also carry out an online search for Help to Buy properties in your location, but the simplest way is to access the directory for your area.
For example, if you’d like to find Help to Buy London flats for sale, click through the Midlands and London property search. Alternatively, for Newcastle, Leeds, or Middlesbrough builds, you’d click the North property search, and so on.
Am I eligible for the Help to Buy scheme?
If you believe you fit all the criteria, the next step is to apply through the relevant agent for your area. They will assess your position and financial records and, if successful, give you the authority to buy your new home. You can speak to an agent or apply online.
- Help to Buy agent for the North (Tel: 0300 790 0570)
- Help to Buy agent for the Midlands and London (Tel: 03333 214 044)
- Help to Buy agent for the South (Tel: 0800 456 11 88)
Each agent will guide you through your options to check the payments are affordable. They are also positioned to offer advice on alternative government property schemes, including Shared Ownership and Older People’s Shared Ownership.
Is Help to Buy available for the over-50s?
The current scheme is available to all over 18s, so as long as the applicant fits the essential criteria, there’s every possibility they’ll be accepted. If they’re first-time buyers with an appropriate repayment mortgage term and income, Help to Buy for over-50s shouldn’t be a problem.
The scheme is designed to help those who need a little assistance putting a big enough deposit to buy a new build home, whatever their job, role, or situation. So when it comes to utilising Help to Buy for teachers, professionals, retailer workers, doctors, nurses, construction workers or labourers, as long as they match the eligibility requirements, everyone is a suitable applicant.
Help to Buy websites and resources
For the full Homebuyer’s guide to the Help to Buy: Equity Loan (2021 to 2023), please visit the Gov.uk website.
Additionally, you can find a wealth of information, case files, properties and eligibility calculators at the regional websites for Help to Buy North, Help to Buy South and Help to Buy Midlands and London.