The Help to Buy scheme in England
The “Help to Buy” scheme in England allows you to buy a home with just a 5% deposit. The government will give you a 20% equity loan, giving you a total deposit of 25%. You will then take out a 75% mortgage. The government loan is interest free for the first 5 years.
As an example, based on a home worth £200,000, you would contribute £10,000, the government would then give you an equity loan for £40,000, and your mortgage provider would give you a mortgage of £150,000.
New changes to the Help to Buy scheme
For new home completions from 1st April 2021 onwards, the scheme is only available to first time buyers, so in order to be eligible you must never have owned a home.
There will also be regional price caps based on local markets, meaning there will be a limit to the price of the house you are able to buy depending on where you want to live within England. Currently the price cap is the same throughout the country.
You can apply for the new scheme now and get the keys to move in from 1st April 2021. This new scheme is set to be available for only two years, until March 2023.
Find out more about the new scheme, read the The Homebuyers Guide to Help to Buy: Equity Loan 2021-2023
The regional price structure for the new scheme is as follows:
North East £186,100
North West £224,400
Yorkshire and The Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
South East £437,600
South West £349,000
What will I pay after 5 years?
The government loan is interest free for the first five years after you purchase your property, after which a fee will apply starting in the 6th year. Your solicitor or conveyancer will be able to give you more precise information regarding your future fees.
Am I eligible to buy a home with Help to Buy?
The government launched the Help to Buy scheme to make it easier for first time buyers to get on the property ladder. If you are in a position where you want to buy a new property, but you cannot afford a large deposit, this could be an excellent option.
To be eligible you must be 18 or over, you cannot have previously owned a property, and the purchase price of the property you are planning to buy is less than the regional price cap depending on where you want to live (see above). This scheme is available in England only. The Scottish Government, Welsh Government and Northern Ireland run similar schemes – check out their websites.
How do I go about buying a home through Help to Buy?
Most new home developers will be able to offer advice on the availability of Help to Buy schemes at their developments. Simply enquire about the development you’re interested in, and ask about Help to Buy. You can also talk to a Help to Buy agent in the area you want to live.
Find out more on the Government's Help to Buy website.
Things to consider before buying a home using Help to Buy
There are other factors which may impact your decision on whether Help to Buy is right for you. Make sure you speak to an independent financial advisor and weigh up the pros and cons before you decide:
- You will start paying interest on your loan after 5 years. Make sure you factor this in to your monthly outgoings, or decide how you might pay it back.
- You will still need a deposit equal to 5% of the value of the home.
- All usual moving fees apply including surveys, stamp duty and legal costs.
- If you live in London, the value of the equity loan may be up to 40% of the value of the home which is a larger loan which you’ll need to pay back.
- Depending on your circumstances, you may be better suited to buying a home using Shared Ownership. Your financial advisor can help you make a decision. Read more about Shared Ownership.
House builders with Help to Buy available
The following house builders offer Help to Buy across their developments: