Help to Buy 101: Help to Buy explained

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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 homebuyer 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.

 

What do I need to know about the Help to Buy equity loan?

Potential buyers are often confused by the home buying process, especially when you add schemes such as Help to Buy to the equation. However, the whole process is likely much simpler that you think! Check out our Help to Buy 101 and find out all you need to know about the Help to Buy equity loan.

 

Help to Buy Basics

Help to Buy is a government backed scheme which aims to help first time buyers get a foot onto the property ladder. The Help to Buy equity loan enables purchasers to buy a new build home with the help of an equity loan, also known as shared equity.

The government provides a loan of up to 20% of the home, so the purchaser only needs to raise a 5% deposit, with a 75% mortgage making up the rest. As the equity loan counts towards your deposit, you may be able to take out a mortgage where you might otherwise struggle. This also means that you don’t have to take out a costly 95% mortgage. Please note that the Help to Buy: Equity Loan is subject to eligibility, terms and conditions.

Follow this link to find out more about the Help to Buy equity loan.

 

Please note that the Help to Buy equity loan will come to an end on Friday 31st March, 2023. However, the scheme will close to new applicants at 6pm on Monday 31st October, 2022.

 

London Help to Buy

Launched in February 2016, the London Help to Buy scheme is aimed at helping buyers in the capital.

The only difference from standard Help to Buy is that, to reflect the current property prices in the capital, the government increased the upper limit for the equity loan from 20% to 40%, enabling buyers to get a foot on the property ladder within Greater London. The buyer is still only required to raise a 5% deposit, with a 55% mortgage to make up the rest. Please note that the Help to Buy: Equity Loan is subject to eligibility, terms and conditions.

Follow this link to find out more about London Help to Buy in our jargon busting video.

 

Help to Buy Eligibility

The Help to Buy equity loan is a government backed scheme which helps buyers who can’t quite afford to buy a property outright. Because of this, there are some specific eligibility criteria that you need to meet:

  • You must be at least 18 years old.
  • You must be a first time buyer, meaning that you have never owned another property either in the UK or abroad.
  • If you are purchasing a property with another person, you must both meet the definition of a first time buyer to benefit from the scheme.
  • You have at least 5% deposit of the full purchase price.
  • You must be able to fund at least 80% (60% in London) of the purchase through a combination of deposit and mortgage.
  • The value of the property you’re purchasing can’t be over the regional price cap for your area – full list of price caps below.
  • You are able to prove that you can afford the mortgage repayments and other outgoings on the home you wish to buy.

 

Help to Buy Homes

Help to Buy is only available on developments where Homes England have a registration agreement with the housebuilder. Both houses and apartments are available through the scheme, however there’s a couple of things to note:

  • The Help to Buy equity loan is available on new build properties only.
  • You may need to pay Stamp Duty Land Tax when you purchase.
  • You cannot buy a home that exceeds the regional cap for your area. The regional price caps for Help to Buy are as follows:
    • London: £600,000
    • South East: £437,600
    • East of England: £407,400
    • South West: £349,000
    • East Midlands: £261,900
    • West Midlands: £255,600
    • Yorkshire and the Humber: £228,100
    • North West: £224,400
    • North East: £186,100

Follow this link to start your search for a Help to Buy home on Share to Buy.

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. 

 

Help to Buy Repayments

The Help to Buy equity loan is interest free for five years – you are only required to pay a monthly management charge of £1 during this time. After the five years, the purchaser pays an annual fee of 1.75% on the amount of the outstanding loan; this fee will increase each year with inflation.

You will have to pay back the Help to Buy equity loan when you sell your home or at the end of your mortgage period – whichever comes first. However, you can also pay back some of the equity loan without selling your home; you can pay back either 10% or 20% of the total amount, so long as the loan is worth at least 10% of the value of your home.

Follow this link to find out more about the costs associated with buying a Help to Buy home.

 

Help to Buy ISA

As of November 30th 2019, Help to Buy ISAs are no longer available but if you opened one before the end date, you can still use your savings towards buying your first home!

With the Help to Buy ISA, the government boosts your savings by 25% meaning for every £200 you save, you’ll receive a bonus of £50 – with a maximum bonus of £3,000. However, the accounts are available to each first time buyer, not each household, which means that if you’re buying with another person who also has the ISA, you could receive a bonus of up to £6,000.

You can then use your savings and the government bonus towards buying your first home – whether you’re looking to purchase with the Help to Buy equity loan or other home-buying schemes.

 

 

If you think that the Help to Buy equity loan is the home buying option for you, then why not take a look at our available properties; you can use our property filters to find your ideal home, basing your search on key criteria including location, number of bedrooms and deposit amount. If you’re interested in finding out more about the Help to Buy scheme, you can also check out our FAQs section. 

Alternatively, if you’d like to find out about other home-buying options, why not check out our Shared Ownership 101!