Skip to main content

The government launched the Help to Buy Scheme in April 2013 to help first time buyers and home movers to be able to afford to get a leg-up onto the property ladder.

Stuck in the cycle of renting, a lot of people were unable to save for the deposit to put down on a property which meant they would never be able to buy a home, that all changed thanks to the Help to Buy scheme.

HTB scheme offers an interest-free (for five years) equity loan for up to 20% of the value of the property, or up to 40% for homes in London. The Help to Buy scheme has become a huge housing initiative and has been a beacon for affordable housing.

Over 200,000 homes have been bought using the scheme and over a third of these homeowners have said that they wouldn’t have been able to do it without the scheme. It has also become apparent that is has helped these people to buy more quickly.

This scheme is expected to end in March 2023, by which time they are hoping to have doubled the amount of properties that have been bought with the scheme.

What you need to know about Help to Buy

First-time buyers as well as existing homeowners receive an equity loan from the government in order to buy a new build property worth up to £600,000. Buyers will receive assistance from the Homes and Communities Agency (HCA) who use a firm called Target to run all administrative duties.

There are obviously a few rules to this.

  • These cannot be sublet
  • Your hold home cannot be part exchanged purchasing your new home.
  • You cannot own another property when

The loan itself must be repaid by the end of the mortgage term – 35 years being the longest term you can borrow for under the scheme. The loan can be paid off either in a lump sum, by incremental payments known as ‘staircasing’, or when selling the home.

See also  Own a First-Time Buyer Property?

How interest rates are applied with Help to Buy

Within the first five years, home buyers under the scheme will not pay any interest fees on the government’s equity loan. In the sixth year, the interest rate is set at 1.75%, after which the fee rises with inflation based on the retail price index (RPI) plus 1% each year.

1-5 N/A 0% £12/YEAR
6 N/A 1.75% £700
7 6% 1.86% £744
8 6% 1.97% £788
9 6% 2.08% £832
10 6% 2.21% £840

Remember: these are annual payments which only cover the interest on the equity loan on top of the monthly repayments for the 80% mortgage

What happens when you sell your home?

You will be pleased to know there are no restrictions when you can sell your home, both the equity loan and mortgage will need to repaid upon completion of sale. You must contact the National Post Sales Agency who will appoint you an independent valuer to decide the value of your property.

If you do sell your property for more than the prevailing market value, then the amount due to Homes England under the equity loan will be their percentage value of the actual sale price. Homes England will not agree to release its charge over the property for sales at less than market value.

Outstanding fee’s or interest, for example, interest arrears at the time of selling, these must be paid before the sale is completed. When you sell your home, or the mortgage is paid off, you will have to repay the equity loan plus a share of the home’s increase in value.

Types of Help to Buy schemes available?

Help to Buy (Scotland) Affordable New Build

First-time buyers and home movers now have the opportunity to purchase a new build property priced up to £200,000. A maximum equity loan of 15% is interest free for the full term, and the scheme is set to come to an end in March 2021.

See also  Mortgage Payment Holidays Explained

Help to Buy: Equity Loan Wales

Administered by the Welsh Government, offers a 20% equity loan to first-time buyers and home movers for new build properties, in line with England. However, there are a couple differences:

  • The maximum property price limit is set at £300,000
  • Documented evidence of eligibility to the scheme is required by applicants
  • Not all lenders accept the Wales Help to Buy

Co-Ownership in Northern Ireland

Northern Ireland runs a shared ownership scheme where you can buy part of a property while a housing association owns the other part and rents it out to you. You can own between 50% and 90% of a property valued at no more than £165,000. Find out more information on eligibility on the Housing Advice NI website.

Help to Buy: Shared Ownership

Shared Ownership is available to those who cannot afford a mortgage on 100% of a home. Instead, they buy a share of a home (between 25% and 75% of the home’s value) and pay rent on the remaining share to a housing association (usually at 3% per year). You have the opportunity to buy more shares in your home, known as ‘staircasing’.

You could buy a home through Help to Buy: Shared Ownership in England if:

  • your household earns £80,000 a year or less outside London, or your household earns £90,000 a year or less in London
  • you are a first-time buyer, you used to own a home but can’t afford to buy one now or are an existing shared owner looking to move.

Forces Help to Buy

FHTB allows Armed Forces personnel to borrow up to 50% of their salaries interest free to fund the deposit for a house. The maximum loan is £25,000 to be repaid over 10 years. The scheme comes to an end in December 2019, at which point it’ll be reviewed.

You are in luck as Mortgage Squared specialize in Forces mortgages and can help walk you through this process so in touch –

See also  Mortgage Myths - misconceptions uncovered

Help to Buy ISA explained

It’s a savings pot designed to help first-time buyers save a deposit for their home. The government adds 25% to your savings, up to a maximum of £3,000 on savings of £12,000.

For the Help to Buy ISA, you must:

  • be 16 or over
  • have a valid National Insurance number
  • be a UK resident
  • be a first-time buyer and not own a property anywhere in the world
  • not have another active cash ISA in the same tax year. Although if you have opened a cash ISA this tax year, you can open a Help to Buy: ISA but will have to take additional steps.

To qualify for the government’s 25% bonus, the property you want to buy must:

  • be in the UK
  • have a purchase price of up to £250,000 (or up to £450,000 in London)
  • be the only home you will own
  • be where you intend on living
  • be purchased with a mortgage

The Help to Buy ISA will come to an end in November 2019. However, existing holders will have until 1 December 2030 to claim the government bonus.

Mortgage Squared can help!

Here at Mortgage Squared we pride ourselves in looking after our customers and getting them the best deal for their circumstances. With regards to Help to Buy, we will be there to explain how it works, what you will need to be eligible for the scheme and beginning to end processing.

Our mission is to take the stress and overwhelm out of getting a mortgage. We work closely with all parties involved and if something doesn’t go according to planned, we are there 100% to buffer the stress and remedy the issues. Having a down to earth mortgage broker enables you to sit back and relax while everything is being organized and processed for you.

To talk to one of our advisors please contact us



Leave a Reply