Help to Buy Scheme
What is Help to Buy
The main aim of help to buy is to improve the access to and affordability of mortgages for newly built flats and houses, specifically for those people who cannot afford a large deposit.
The current Help to Buy scheme is available on all newly built homes in England up to £600,000 and will run up to April 2021. There are other similar schemes available in Scotland, Wales and Northern Ireland. From April 2021 to March 2023, a new scheme will start that is restricted to first-time buyers and includes regional property price caps to ensure the scheme reaches people who need it most. There are no changes to the current Help to Buy equity loan scheme. Under the new scheme, the government will still lend buyers up to 20% of the cost of a newly built home, and up to 40% in London.
The Key Facts about Help to Buy
The government will lend you up to 20% (or 40%) of the value of your new property through an equity loan, which will be interest-free for the first five years and can be repaid at any time or on the sale of your home. You will only need a minimum 5% deposit to qualify. Help to Buy is available to all purchasers, not just first-time buyers. The current scheme is available until April 2021 on all new build homes in England up to the value of £600,000. There is no household annual income limit, but you must not own any other property at the time you buy your new home with Help to Buy; it is only available on new build properties and customers will need to secure up to a 75% mortgage.
How it works
The government will lend up to 20% (or 40%) of the value of a new build home through an equity loan. The buyer contributes a deposit of their own of between 5% and 20%, then the Help to Buy scheme tops that deposit up to make it a 25% deposit which leaves the buyer needing a mortgage for 75% of the property value.
Who is eligible?
The current equity loan is available to all purchasers of newly built homes, not just first time buyers, although it is restricted to a maximum property value of £600,000. All purchasers will also be subject to a Housing & Communities Agency (HCA) affordability check.
What does it cost?
The government equity loan is interest free for the first five years after which a fee of 1.75% will be charged from year six, rising annually by RPI inflation plus 1%. The equity loan can be repaid at any time within 25 years (or the terms of the mortgage), or on sale of the property. The initial loan is repaid, plus a proportion of any growth in the property value.
When is it available?
The current scheme will run until April 2021 when a new scheme starts as detailed above.