Help to Buy: Equity Loan
How does the Help to Buy equity loan work?
Help to Buy has closed to new applicants
Please note that the Help to Buy equity loan closed to new applicants on October 31st, 2022.
If you’re a buyer eligible for the equity loan, and you submitted your application before the cut off, your homebuilder must finish building your home by Saturday 31st December, 2022. You must then legally complete and get the keys to your new property by 6pm on Friday 31st March, 2023. It has been confirmed that there will be no extensions or exceptions.
Find out more on Share to Buy or learn about Help to Buy alternatives including Shared Ownership and other home-buying and affordable rental options.
Help to Buy: Equity Loan
The Help to Buy equity loan is available to first time buyers, meaning those who have never owned another property either in the UK or abroad.
The home you want to buy must be newly built with a price tag that doesn’t exceed the regional price cap for your area – for example, up £600,000 in London or up to £437,600 in the South East. For a full list of the Help to Buy price caps, please visit our information guide about the scheme. You won’t be able to sub-let this home or enter a part exchange deal on your old home.
This scheme is only available in England. However, the Scottish Government, Welsh Government and Northern Ireland Housing Executive run similar schemes – you can find further information on their websites.
Buying a Help to Buy home
With a Help to Buy equity loan, the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. Please note that the Help to Buy: Equity Loan is subject to eligibility, terms and conditions.
To reflect the current property prices in London, if the buyer is purchasing a home in the capital, the upper limit of the equity loan is boosted to 40%. You can find out more about the London Help to Buy scheme here.
The Help to Buy equity loan is interest-free for the first five years of owning your home. After that, the purchaser pays an annual fee of 1.75% on the amount of the outstanding loan, however this fee will increase each year by inflation. For further information about the home-buying and application process with the Help to Buy: Equity Loan, please refer to the Help to Buy Agent in your area.
The below diagram provides an example of how Help to Buy would work on a home worth £200,000:
Selling a Help to Buy home
If an owner wants to sell their Help to Buy home, they must repay the percentage of the equity loan that is still outstanding.
For example, if the home from the above diagram went on to sell for £210,000, the seller would receive £168,000 (80% from their mortgage and the cash deposit) and would pay back £42,000 on the 20% loan. The seller would also need to pay off their mortgage with their share of the money.
For more information – including advice on fees and paying back your loan – you can download the government’s Help to Buy buyers’ guide.
Finding a Help to Buy home
The Help to Buy equity loan scheme is run by government-appointed Help to Buy agents who can offer guidance on the equity loan, eligibility and affordability criteria, and can support you in the process of purchasing a home through the scheme.
As of January 2020, the three new Help to Buy agents are:
- Plus Dane Housing – Agent for the North
- BPHA – Agent for The Midlands and London
- Radian – Agent for the South
Appointed by Homes England, these agents administer the Help to Buy equity loan and have the authority to give the go-ahead for you to purchase a home with help from the equity loan scheme.
For more advice, you can also check out the Money Advice Service and other useful contacts.
Searching for a home on Share to Buy
To search for a Help to Buy home in your area, you can head over to Share to Buy’s property portal. From there, you can look for homes based off of your own requirements and needs – this includes scheme type, property type, number of bedrooms, search radius and deposit amount. Each live property will offer a budget calculator, outlining the minimum deposit required and monthly costs.
You can also save your searches and register to receive alerts when new properties are announced by email.
Want to find out more about Help to Buy or Shared Ownership? Visit our article index for informational features and blogs, or check out our helpful FAQs and guides. Alternatively, you can start your search for a new home on Share to Buy’s property portal today!