What is Help to Buy?

Help to Buy is a government scheme. It's aimed to help people who are finding it hard to save enough to move up the property ladder or buy their first home.

House prices in the UK are quite high compared to the average salary. So many people struggle to save a deposit for a house or to get a mortgage that covers the cost of a property in their area.

They stopped taking new applicants for the Help to Buy ISA on 30 November 2019.

This has been replaced by the Lifetime ISA.

This is a similar scheme that helps you save to buy a home, or for retirement.

How does Help to Buy work?

You can use a Help to Buy ISA or a Help to Buy equity loan to make buying a property easier.

With a Help to Buy equity loan, the government will lend you money, interest free, for a fixed period of five years. You’ll start paying interest after this initial fixed period if your loan is not repaid.

With a Help to Buy ISA you set up your own ISA, which the government will then pay into.

Help to Buy Equity Loan vs. Help To Buy ISA

With a Help to Buy equity loan, the government lends you up to 20% of the cost of your home.

This means you’ll need a 5% deposit and a 75% mortgage. Instead of the 25% deposit you often have to pay.

The loan is interest free for the first five years, and low interest after that. Interest in year six is just 1.75%, increasing by 1%, plus inflation, after that.

So if you can repay the loan in the first five years, you’ll never pay any interest. You can also pay off the loan at any time without penalties.

A Help to Buy equity loan only applies to new build properties with a value of less than £600,000. You can be either a first time buyer or a homeowner.

Help to Buy ISAs aim to help first time buyers save a deposit for their home.

If you open a tax-free Help to Buy ISA, the government will add another 25% to what you save, up to £12,000.

If you save the maximum of £12,000, over five years, the government will add another £3,000.

There are a range of Help to Buy ISAs, so you should be able to find one that's ideal for you. (1)

Help to Buy Equity Loan

Help to Buy ISAs

With a Help to Buy equity loan, the government lends you up to 20% of the cost of your home.

This means you’ll need a 5% deposit and a 75% mortgage. Instead of the 25% deposit you often have to pay.

The loan is interest free for the first five years, and low interest after that. Interest in year six is just 1.75%, increasing by 1%, plus inflation, after that.

So if you can repay the loan in the first five years, you’ll never pay any interest. You can also pay off the loan at any time without penalties.

A Help to Buy equity loan only applies to new build properties with a value of less than £600,000. You can be either a first time buyer or a homeowner.

London Help to Buy

As house prices in London are higher, you can get a Help to Buy equity loan of up to 40% of the value of a London property. This is interest free for the first five years.

Help to Buy shared ownership

Shared ownership is a scheme under the Help to Buy initiative, that lets you buy a share in your home. This is if you cannot afford a mortgage on 100% of a property.

Help to Buy mortgages

You will need to get a mortgage for the part of your home not covered by your deposit or equity loan.

Many lenders offer Help to Buy mortgages.

Tell your lender if you’ll be using the Help to Buy scheme to buy your home. They'll help you find the right mortgage for you.

Am I eligible for Help to Buy?

You can get an equity loan if you're:

  • a first time buyer

  • an existing homeowners

  • buying a new-build home that costs less than £600,000

This scheme is only available if you live in England.

There are similar schemes available in Scotland, Wales and Northern Ireland.

If you're buying a new home with a Help to Buy equity loan you cannot:

  • sublet your home or enter a part exchange deal on your old home

  • own any other property

  • own a home anywhere else in the world

You also need to:

  • be a UK resident

  • have a valid National Insurance Number

  • not have another active cash ISA alongside your Help to Buy ISA. (2)

To be able to get the government bonus on your Help to Buy ISA, your property must be:

  • in the UK

  • worth up to £250,000 outside of London

  • worth up to £450,000 in London

  • your only home

  • a property you intend to live in

  • bought using a mortgage

You can use a Help to Buy ISA as well as a Help to Buy equity loan, as long as you meet all the criteria for both schemes.

Is Help to Buy worth it?

Like any scheme or loan, there are benefits and downsides to Help to Buy.

Using Help to Buy calculators

Help to Buy calculators can help you work out if you can afford to buy a home through a Help to Buy scheme.

You'll need to enter:

  • where you’re looking to buy a home (in or out of London)

  • your annual income

  • the property price

The calculator will estimate how much you can borrow.

Help to Buy calculators do not look at things such as your outgoings, or other debts you may have.

You’d have to consider these things to work out if you can afford your repayments on your mortgage and equity loan.

The calculator will give you an idea of what you can afford with your deposit, income and potential Help to Buy loan.

Help to Buy (Wales)

In Wales, the Help To Buy scheme lets first-time buyers buy a new build home for up to £300,000 with as little as 5% deposit.

The government will loan you up to 20% of the purchase price, interest-free for five years. You’ll need to take out a mortgage on the rest.

After the first five years, you’ll be charged 1.75% interest on the loan. This will then increase by 1% plus any increase in the Retail Prices Index each year. There’s also a monthly £1 admin fee to pay.

You’ll have 25 years to pay off the loan in chunks (known as stair-casing) or all in one go.

The loan is based on a percentage of equity. So you could end up paying back more than you borrowed if the value of your home goes up.

Who's eligible?

To qualify for the scheme in Wales:

  • you must be buying your first home

  • the purchase price must be less than £300,000

  • you must buy the home from a builder who’s registered with the scheme

  • you'll need to put down a deposit of at least 5%

  • the deposit and mortgage must make up at least 80% of the purchase price

  • you must get the mortgage from a qualifying lender

You will not be able to sublet any part of your home under the scheme.

More about the Welsh Home to Buy scheme on the Welsh government website.

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Sources

The information on this page was sourced from HelpToBuy.gov unless otherwise stated below.