Help to Buy Scheme Mortgages

Help to Buy is a government programme that aims to support first-time buyers and home movers with minimal equity. You need to put down 5% of the home’s worth as a deposit under Help to Buy.

What is the Help to Buy Scheme?

Help to Buy is a government programme introduced in the 2013 budget to assist citizens in purchasing a new home with as little as a 5% deposit and a government equity loan of up to 20%. This programme aims to increase the availability of new homes on the market while also increasing the number of lower deposit mortgages with more favourable borrowing rates.

Thanks to Help to Buy, buying a new home has never been more affordable; it will give you access to a wider variety of mortgage products with a loan-to-value ratio of up to 75%.

  • Help to Buy has helped over 77,000 people in the UK move since it was introduced
  • You may only need a 5% deposit
  • The Government will lend you up to 20% of the purchase price (called an equity loan) interest-free for the first 5 years
  • Helps you to secure a 75% mortgage
  • It is available to anyone looking to purchase a new house, not just first-time buyers. Different areas have different property value limits.

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Am I guaranteed to get a mortgage? Are there any criteria I need to meet?

Borrowers must pass sufficient measures to ensure they can repay the mortgage and pass the credit and affordability checks of their preferred lender and pass the affordability checks on the help to buy calculator, which can be found on their website.

What are the terms and conditions of the Help to Buy equity loan scheme?

A maximum of 20% of the purchase price would be given to eligible applicants as an equity loan (based on the open market value). Buyers must finance at least 80% of the purchase price with a traditional mortgage, savings, and any other necessary deposit.

There is no interest on the equity loan for the first five years. The equity loan has a rate of 1.75 % at the start of year six, which increases annually by RPI inflation plus 1%. The HCA provides the equity loan, which is kept as a second fee.

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What is a Help to Buy Scheme Mortgage?

First-time buyers and home movers who apply for the Help to Buy mortgage programme will only need to put down 5% of the home’s value as a deposit. The government would then step in with an equity loan to help raise this amount.

Help to Buy programmes, which the government backs, are geared to assist first-time buyers and others in stepping up the property ladder.

Types of Help to Buy Scheme Mortgages

Help to Buy: Equity Loan

The Help to Buy Equity Loan scheme requires a homeowner to put down a 5% deposit on a new-build home, with the government lending up to a further 20% – or 40% if you live in London – for a total deposit of 25%, or 45% for Londoners.

This part of the plan doesn’t apply to Properties that aren’t brand new, and there’s a £600,000 maximum purchase price.

For the first five years, the government’s portion of the loan is interest-free. From year six onwards, you’ll be paying 1.75% interest. After that, the rate rises every year by 1% in line with the Retail Prices Index – RPI – inflation rate.

Since it’s an equity loan rather than a fixed sum, you’ll have to repay the government 20% of the value of your house when you sell it.

You can repay the equity loan at any time until then, without interest, as long as you do so in blocks of at least 10% of the existing market value of your house.

Help to Buy: Shared Ownership

Shared ownership is a government-backed programme that assists people who can’t afford a full mortgage on a home. Shared ownership allows you to purchase a portion of your home (between 25% and 75% of its value) and pay rent on the remaining portion.

You may be able to purchase a larger share of the house later on. The scheme is only available in England, and the full information can be found here.

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London Help to Buy

On February 1, 2016, the government’s London Help to Buy scheme went live.

Prospective buyers in London will still be required to put down a 5% deposit on a new-build home, much like the Equity Loan programme in the rest of the UK. Still, they will be able to borrow up to 40% of the property value instead of the 20% available elsewhere.

That means you’ll have 45% to put down of the property’s worth after factoring in the 5% deposit you’ve saved. You will need to take out a mortgage for the remaining 55%

Only new-build properties worth up to £600,000 are eligible for the scheme, and the property you’re purchasing must be your only residence. Help to Buy cannot be used to purchase a buy-to-let home.

If you’re buying in any of London’s boroughs or the City of London, you’ll only be eligible for the 40% loan.

Help to Buy equity loans in Scotland

It’s called the Help to Buy (Scotland) Affordable New Build scheme north of the border.

  • Open to first-time buyers and home movers
  • Only for a new build
  • Max purchase price of £200,000 (2018-21)
  • It’s your only home, and you don’t sublet or rent it out
  • Help with 15% of the purchase price

Government-backed co-ownership schemes in Northern Ireland

The government administers a similar co-ownership arrangement in Northern Ireland, which allows you to purchase a share of a property and rent the rest.

The property value is limited to £165,000. You can buy as much as you want, ranging from 50% to 90% of your budget.

Forces Help to Buy

The Forces Help To Buy Scheme ( FHTB ) allows forces personnel to borrow up to £25,000 interest-free (repaid over 10 years) to use as a deposit when buying a property to be used as their main home.

To find out more, advice is available to forces personnel through their Chain of Command and personnel agency. Information is also available on the Government website.

Who qualifies for a Help to Buy Scheme Mortgage?

The general eligibility criteria for Help to Buy is as follows:

  • You must be at least 18 years old.
  • There is no maximum household income level.
  • You will require at least a 5% deposit of the full purchase price of the property.
  • It would help if you took out a mortgage that will need 25% or more of the full purchase price.
  • Help to Buy is only available on new build homes.
  • You can’t buy a property that’s on sale for more than £600,000 I.e. London and varies in other parts of the country.
  • If you own another home in the UK or abroad, you must have sold your current home before or at the point of completion on your Help to Buy property.
  • You can’t rent out your existing property to buy a second home through Help to Buy.
  • Part Exchange is not available through this scheme.
  • You cannot sublet your Help to Buy home.
  • You must be able to prove you can afford the mortgage repayments and other outgoings on the home you wish to buy. There is a standard Homes and Communities affordability calculator which will determine whether the property is sustainable long term.

Help to Buy Scheme Mortgages: What to consider?

Do I need a deposit?

The best mortgage rates are normally reserved for borrowers who have saved up at least 25% of the property’s value.

If you have a deposit of at least 5% and follow certain general standards, you should be able to get help with the Help to Buy: Equity Loan programme, whether you’re a first-time buyer or moving on to your next home.

Is the scheme right for me?

Help to Buy could be right for you if you are interested in a brand new home and want to keep your mortgage repayments as low as possible.

How much can I borrow? What about the mortgage?

You can use the Help to Buy scheme to buy a property worth up to £600,000 if you meet the eligibility requirements and pass the affordability tests.

One of our suggested Independent Mortgage Experts will provide you with more financial details and help you navigate the Help to Buy process.

Can I use this scheme if I have a house to sell?

Part Exchange is not available under Help to Buy.

Alternatives to Help to Buy

Consider a low-deposit mortgage that isn’t part of a government-sponsored programme.

Some lenders will accept mortgages with Deposits as low as 5%, but you’ll have a wider selection of options if you save at least 10%.

Some lenders also offer 100% financing, but these are usually very stringent and often require a guarantor.

More information on Help to Buy

If you’re interested in Help to Buy, you can start by contacting a Help to Buy agent in the area where you want to buy. Help to Buy agents, not mortgage lenders, handle the scheme.

To find lists of Help to Buy agents and more information about how the scheme operates, go to the government’s Help to Buy website and click on the “Equity loan” tab.

You can find out more about government schemes to help you buy a home here. Please be wary that NOT ALL mortgage lenders offer Help to Buy mortgages, so yet again, get in touch and speak with one of our experts.

Want to know more?

For more details, call our Mortgage Saving Experts today.

How Mortgage Saving Experts and Help to Buy can assist you in finding your new home

We can help in 3 easy steps:

  1. Have a chat with you to see what you want to do and how much you can borrow and afford to buy.
  2. Search the whole of the market and come back to you with the best rates.
  3. Once you have found a property, we can help you apply to help To Buy and apply for the mortgage for you as well then see it all through until the day you get your keys and move in.

Comparing mortgage quotes

You can use our mortgage comparison tool to see how much of a loan you’d like from a lender, which you can then add to your Help to Buy loan and deposit to compare mortgage quotes.

You’ll be able to compare mortgage quotes based on the initial monthly costs, interest rates, contract duration, overall LTV, and any product fees you’ll have to pay for each deal. It’s important to keep in mind that any quotes you receive won’t include the Help to Buy loan repayments you’ll have to start making after five years, so you’ll need to be sure you can handle both sets of payments.

The comparison tool doesn’t consider your financial situation or your credit history, which means that any LTV or interest rates you’re offered when you come to apply for a mortgage may be different.

What do I do next?

If you have a particular development or property in mind, please contact one of our helpful Experts.

Help To Buy Q&As

Will help to buy be extended?

Not without permission. Help to Buy is designed to help people move on to or up the housing ladder, you should consider repaying part or all the Homes and Communities Agency’s contribution before making plans for improvements or alterations. This is because the Agency is trying to help future buyers and may use the proceeds of these repayments to make more assistance available. Therefore, consent will not usually be granted for significant home improvements. The Post Sales Help to Buy Agent will act reasonably in considering any application and will review cases of hardship if, for example, property modifications are required for a disability. When your property is sold in the future, if improvements have been made with the approval of the Post Sales Help to Buy Agent, these will be ignored when your property is valued to work out how much should be repaid to the Agency.

Can a help to buy ISA be used for the deposit?

The simple answer is yes. That’s what the government set up the Help to Buy ISAs for.

Can you remortgage a help to buy?

We have done it plenty of times so depending on your financial circumstances yes you can remortgage. At this stage it may be worth mentioning the “Staircasing” scenario. Staircasing means you can potentially borrow more money against the value of the property to buy a larger percentage in your property. If you bought 80% of the property value, then you can potentially buy more of a percentage of the property in increments of 10% If you can afford to I always recommend buying the rest of the share of the property as soon as it is affordable. The reason for this is because the more your property price increases the more equity the Help to Buy guys will get and the bigger the mortgage you will have to get if you wish to staircase in the future.

Can you use help to buy twice?

No. When you buy through the Help to Buy scheme you are not allowed to own any other property, so you will not be able to use it twice

Can help to buy be used for second home?

No. If you can afford to purchase another home you will have to repay the Help to Buy: Equity Loan. The property purchased must be your only residence. Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase. You cannot rent out your existing home and buy a second home through Help to Buy. Applicants who make fraudulent claims for Help to Buy assistance will be liable to criminal prosecution. Fraudulent claims will always require immediate repayment of the equity loan.

Will I have to pay Stamp Duty?

The Government’s standard rules and procedures for Stamp Duty Land Tax (SDLT) apply to all Help to Buy purchases. SDLT is payable at the time of purchase, on the full purchase price of the home. That is, the amount paid by you (the first mortgage and any cash contribution) plus the value of the Help to Buy loan. There is no further SDLT to pay on any ‘staircasing’ repayments or repayment when the home is sold. You should budget for SDLT on the full open market price of the property when you purchase a Help to Buy home. Your solicitor and mortgage adviser can advise you how much the stamp Duty will be when before you purchase your new property, so you may budget for this.

Who pays for repairs and ongoing maintenance to my home?

You will own 100% of the property, therefore, it is your responsibility to repair and maintain your home. New homes often come with a guarantee that will cover certain defects for up to 10 years after it was built. This guarantee usually only covers defects in the house. Your solicitor/conveyancer will be able to advise in more detail on this. Typical new homes come with a guarantee called an NHBC.

Who provides the Government’s contribution for Help to Buy?

The equity loan is provided by the Homes and Communities Agency and administrated by your local Help to Buy agent. The contribution is secured by a second charge on your property title registered at the Land Registry.

How long will it take before I can move in?

Because Help to Buy: equity loan homes are generally on new developments (and may still be under construction), in common with most new home sales, you will be expected to sort your mortgage and they require you to exchange contracts within one month of paying your reservation fee. Your moving in date may depend on the time required to complete construction work – this will vary from scheme to scheme. Some Help to Buy applicants may need to wait for a longer period for a home that matches very specific needs whereas others may buy from a development that allows you to move in earlier.

What happens if the completion of my home is delayed?

Once you have committed to buying a home (at exchange of contracts) the house builder will have agreed to build the home and keep you informed of progress. If you are unhappy about any delays in construction, you must speak to the house builder. Your solicitor/conveyancer will be able to advise on the house builder’s contractual responsibilities before you agree to the sale. You should check with your house builder that the funding will be available on the date you expect to complete your purchase.

Are there any restrictions on the properties that I can purchase?

All Help to Buy: equity loan homes are on new build developments where the Homes and Communities Agency has a registration agreement with the house builder. You can only purchase from these house builders. The maximum purchase price is £600,000.

Can I sublet my Help to Buy home?

No. Help to Buy is designed to assist you to move on to or up the housing ladder. If you wish to sublet, you will first have to repay the Help to Buy: Equity Loan assistance. In exceptional circumstances sub-letting may be considered. For example, if you’re a serving member of the Armed Forces staff whose tour of duty requires you to serve away from the area in which you live for a fixed period. In these circumstances you would also require approval from your mortgage lender.

Can I own other homes and buy a Help to Buy home?

No. Help to Buy is designed to assist you to move on to or up the housing ladder and must be your only residence. This means you will be expected to sell your current home if moving up the ladder. The disposal of your current home will be verified by your solicitor/conveyancer before you can proceed to exchange contracts on your Help to Buy home.

Can I use cash from my council, Housing Association or other public-sector body to buy with the addition of help through Help to Buy?

Yes, provided that your local council is satisfied that this represents value-for-money and the other funding is compatible with Help to Buy. Any funding provided that must be secured against your home would not be compatible with the Help to Buy scheme.

Can I part exchange my existing home for a Help to Buy home?

No. Part exchange is not available. House builders selling Help to Buy homes cannot offer a part exchange sale.

Can I buy with an interest-only main mortgage?

No. Your main lender’s mortgage must be a repayment loan with interest and capital repaid every month. This ensures you make the Help to Buy purchase on a sound basis and protects the tax payers’ investment in your home.

Can I buy a home off plan?

Yes. You can reserve a new home off plan at any time. However, you need to complete the sale within six months from the exchange of contracts. You also need to ensure that your mortgage offer is valid through to legal completion.

After purchasing my home, can I increase my mortgage or take out another loan?

Not without permission from the Post Sales Help to Buy Agent. Further advances must be approved by the Post Sales Help to Buy Agent. Advances to be used for repaying the equity loans in part (staircasing) or full will usually be welcomed and approved. Advances for other purposes will be considered by the Post Sales Help to Buy Agent on a case by case basis (see question below regarding extending or altering the property). You may be able to transfer your mortgage to another lender taking part in the scheme following scheme following prior permission from the Post Sales Help to Buy Agent. However, you must ensure your new lender is informed that your home is a Help to Buy property with a second charge entitling the Homes and Communities Agency to a share of the future sale proceeds. You should note that not all lenders will accept a remortgage where there is already an equity loan in place. The Post Sales Help to Buy Agent may decline permission for further advances or transfer to another lender if after assessment they consider you may be putting yourself in an unsustainable financial position.

After five years of ownership how is the fee collected?

Fees can be paid in a single yearly payment or in monthly instalments. The Post Sales Help to Buy Agent will collect your fee by direct debit or standing order. They will contact you at least one month before your fees are due, to set up your repayment arrangement. If you do not pay by Direct Debit, you will pay an additional administration charge which is currently £4 per month. You will also receive a statement each year confirming when your fees are payable. The annual statement will also show any payments you have made once you start paying the fee.

What if I die after purchasing a Help to Buy home?

This depends on whether you bought your home alone or with others. If you bought the house/flat on your own and you die, the home will be passed on in the normal way under the terms of your will and the payments explained in the Help to Buy guide will be made by your estate in accordance with the scheme. If you have not made a will it will pass under the laws of intestacy. We recommend a sole buyer seeks independent legal advice about this. If you bought your home with others and one of them dies, their interest in the property will either be transferred to the surviving co-owner (s) or will pass under the terms of their will, or (if there is no will) the laws of intestacy. The easiest way to ensure it is passed to the other owner is to put in place a life assurance policy. For more information about life insurance please either speak with your adviser or check out our insurances section on our website We can arrange this for you and your adviser will advise you on this during the process of you purchasing your Help to Buy home It is recommended that where there are two or more owners, they seek independent legal advice about this.

Can I get help with benefits to pay the Help to Buy fees if, for example, I lose my job?

Because Help to Buy fees are not classified as rent, they do not qualify for Housing Benefit. You should make sure you decide to ensure you can continue to make your Help to Buy and mortgage payments if your income stops. There are insurance policies which can help with this such as Income Protection, Accident, Sickness and Unemployment. Our specialist mortgage and insurance advisers at Mortgage Saving Experts can help you with this.

What happens if my partner moves out and no longer wants to be party to the equity loan agreement?

The Post Sales Help to Buy Agent will be able to arrange for a ‘Deed of Release’ which will release your partner from the obligation of having to repay the equity loan. Assuming your mortgage lender is content for this to take place and that you can provide evidence that you can meet your housing costs and still have a reasonable standard of living, permission should be a formality.

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