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Help to Buy Mortgages

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Author: Carl Shave-Director
Updated on June 14th, 2022



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What is Help to Buy?

Help to Buy is a Government scheme initiated in 2013 as a response to burgeoning house prices across the country and the financial struggle many people faced when trying to buy a new home. It aims to help first-time buyers afford a mortgage on a home that would otherwise have been out of their reach in the current housing market and economic climate.

When first put into place, Help to Buy incorporated four aspects: equity loans, Shared Ownership, NewBuy and the mortgage guarantee. Of these, only the Help to Buy: Equity Loan and Shared Ownership schemes still remain. Under Help to Buy in England, the Government will extend a loan of up to 20% of the property’s value (or 40% in London), which is interest-free for the first five years. The loan will be tied in with the value of your property, but with our help you’ll be able to put together a plan to realise your home-buying dreams now and stand you in good stead for the future.

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How do I get a Help to Buy mortgage?

Since 2013, the Help to Buy mortgage scheme has enabled thousands of people to buy newly built homes who would not have otherwise been able to do so and, using the Help to Buy: Equity Loan, you can also join them.

The first thing to bear in mind is that not all lenders cater to people looking to purchase under the Help to Buy scheme, and those that do will offer specific products for this sector of the market separately from their portfolio of conventional residential mortgages.

The lender will treat you the same as any other potential borrower and make an affordability assessment to determine what level of borrowing is within your means and ensure that the property and mortgage you are aiming for won’t be too great a financial risk. Uniquely to Help to Buy, the affordability will also be assessed by your local Help to Buy agent.

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Aside from the above points, getting a Help to Buy mortgage with assistance is much the same as obtaining any other kind of mortgage, the process just requires more attention to be paid to the affordability of both loans in the long term. If you talk to a good mortgage broker, they will help you get a thorough understanding of the process at an early stage and help you to present both your mortgage application and Help to Buy application so that they have the greatest chance of success.

Help to Buy Information

Help to Buy: Equity Loans

The Help to Buy scheme is accessible to first time buyers with a 5% deposit in hand, looking to buy new build properties in England with a maximum purchase price that varies depending on region as seen below (although similar schemes do exist in Scotland, Wales and Northern Ireland).

Region Maximum property price
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
London £600,000
South East £437,000
South West £349,000

Under the scheme, the Government will top up your deposit with an equity loan up to the value of 20% of the property, enabling you to only require a 75% mortgage. This makes you a much better prospect for the lender, and possibly opens up access to a better deal on the interest rate. In London only, the loan can rise to 40% of the property value. The loan must be paid back in 25 years or sooner.

Aside from a £1 monthly management fee, the Help to Buy: Equity Loan is free of charges for the first five years, and your only commitment on your property will be your usual monthly mortgage repayments. After five years, the loan is subject to interest at 1.75%, which increases each subsequent year by the rate of inflation (using the Retail Price Index as reference) plus 1%. At this point, you can either repay the whole loan at any time, or pay it off in minimum 10% increments whenever you are able, or repay the full amount when you sell the property.

One important point to be aware of is that while the equity loan will be a certain amount when you receive it, it will always be equal to the percentage of the value of the property it covers, and in effect the Government has an interest in your home. This means that as the value of your property rises over time, so does the value of the loan, and if you sell your property the sale revenue of that percentage of your property will be paid back to the Government.

For example, if you purchase a house with a value of £260,000, supplying a 5% deposit of £13,000 and taking out an equity loan of 20% (£52,000) you would then only need a 75% mortgage of £195,000. When you come to sell the house, its value may have increased to £320,000, in which case you would need to pay back £64,000 (20% of the property’s current sale value), leaving you with 80% of the proceeds – £256,000 – from which you would pay back any of the mortgage still outstanding.

Do I qualify for Help to Buy?

What is the Help to Buy Process?

As a First Time buyer, you may have heard that the Government’s Help to Buy scheme can assist you in purchasing a new build home to meet your needs. So, where do you start with a Help to Buy: Equity Loan, and what is the process?

The first stage is to check your eligibility (as per the above section). The minimum criteria are fairly straightforward, but you will be ruled out if you own another property or residential land now or have done at any time in the past in the UK or abroad, plus if you have had any form of sharia mortgage finance. It’s worth checking on the official Help to Buy website to make sure you qualify.

If you’re eligible, you’ll next need to assess your budget. Going on your current and anticipated income and outgoings, what level of monthly payments would you be able to afford? And, in turn, what would this permit in terms of the size of the mortgage you’ll be able to get? There are several mortgage calculators online you can use to help you with this, but try more than one as they may each allow for different criteria.

You will also need to contact your local Help to Buy agent, who will be able to give you advice and support on your options and explain what you need to do to complete the Help to Buy loan application. At this point, it could be also advantageous to speak to an experienced mortgage broker, who will be able to both assess the level of mortgage you might expect and advise you regarding the applications for both the mortgage and Help to Buy loan.

With a clear idea of your finances, and confidence that the scheme is the right choice for you, you will now be able to research the property market and find your new home.

Affordable Home Ownership Schemes

Before committing to Help to Buy as the means to owning a brand-new home, it’s worth reminding yourself of the other schemes to help both first-time buyers and existing homeowners that may be a better fit for your circumstances. Example:

  • Social HomeBuy

You will find that some local authorities and Housing Associations offer a subsidised scheme for people who have been in social housing for five years or more. Participants will be able to buy a minimum share of 25% in a property at a discount (between £9,000–£16,000) and then pay a reduced level of rent on the balance portion. It’s not available in all areas – you’ll need to check with your local social housing providers.

You may also want to investigate Shared Ownership and Rent to Buy, or (if you have been a social housing resident for more than three years) Right to Buy.

If you have any doubts or queries about Help to Buy or another scheme to assist in getting a mortgage, talking to an experienced mortgage adviser will give you more clarity and signpost the most suitable course of action.

Help to Buy mortgage rates

The first thing to recognise is that not all mortgage providers participate in the Help to Buy scheme, so your options will be restricted to those that are willing to help people using Government assistance to buy their homes. The good news is that, even though there is less competition in this sector, the home loans on offer are not more expensive than a standard residential mortgage.

Participating lenders will have a suite of mortgage products designed especially for people using Help to Buy, but, as with normal mortgages, interest rates and terms will differ across the range according to how you would like your mortgage deal to be structured. There will be the usual variances such as the length of introductory periods, level of deposit required and what peripheral benefits are on offer, from free property valuation to cashback arrangements.

Typically, the larger deposit you can supply, the lower the interest rate will be on your mortgage, and this is the main advantage of Help to Buy. If you are able to supply the usual minimum deposit of 5% of the property’s value, and the Help to Buy loan tops this up to 25%, then lenders will be looking at a loan-to-value (LTR) ratio of 75% on the mortgage. This offers them far better security, and so they are willing to offer better interest rates.

Take the time to weigh up all the variables and decide what will work best for your household in your particular circumstances.

Help to Buy Shared Ownership

You can use the Help to Buy Shared Ownership scheme to buy either a designated new build home or an existing property in England. Various forms of Shared Ownership have been around for many years, allowing you to take out a mortgage to buy a portion of your property – usually between 25% and 75% – and paying a subsidised rate of rent of the landlord of the remaining share. This is usually a Housing Association or other social housing organisation.

To qualify for a Shared Ownership scheme, you can either be:

  • A first-time buyer.
  • A previous homeowner who cannot afford to own a home now.
  • A current shared owner looking to move home.

Your combined household income must be a maximum of £80,000 (rising to £90,000 in London).

Similar schemes are in place in Scotland, Wales and Northern Ireland, with differing terms. The over-55s and those with long-term disabilities are also able to access alternative Government schemes to help them buy property, called OPSO (Older People’s Shared Ownership) and HOLD (Home Ownership for People with Long-Term Disabilities).

Buying a Help to Buy new build

Help to Buy was deliberately designed to help people buy new build homes, bringing modern, contemporary housing within reach of people who may not have been able to afford it otherwise.

Access to a newly built property comes with many advantages. Modern homes are built to exacting standards in terms of materials and sustainability, so your home will be energy-efficient and free from potentially harmful substances like asbestos. They are also likely to come with many items pre-fitted, like smoke alarms, security alarms and modern kitchen appliances. You’ll be the first people to step into your new home, and so will have brand-new fixtures, fittings and finishes which won’t need repair or maintenance for a long time, and a ‘blank slate’ to make the home your own.

A key factor to remember about a new build home is that you also avoid the ‘property chain’ of people perpetually relying on others to move out or in and complete on time in order to make your own home purchase run smoothly.

The current Help to Buy: Equity Loan and Shared Ownership schemes make obtaining a deposit and getting on the property ladder in England much easier than it has been in the past. To further encourage home ownership and get people to invest in property for their future, the Government is also planning to launch the Starter Homes scheme, aimed at younger first-time buyers from the ages of 23–40. The exact timing of this is still to be finalised – see the section above for more info.

Help to Buy with Poor Credit

If you have unfortunately suffered either a minor or a serious financial problem in the past, you may think that this will make it more difficult to get a Help to Buy mortgage. The truth is that there have been changes in recent times that make it easier for people with a poor credit record to use Help to Buy, and you can now access the scheme if you are:

  • Discharged from a bankruptcy for more than 1 year.
  • In a current IVA (individual voluntary arrangement).
  • Clear of mortgage arrears during the last 12 months (arrears prior to this are accepted).

If you fall into these categories, then you will be expected to typically provide a 10% deposit rather than the usual minimum of 5%. In all cases of bad credit, it’s worth talking over your particular case with a specialist mortgage broker, who will be able to pinpoint any issues and help you through the application process.

Help to Buy mortgage lenders

Getting a mortgage can seem like an uphill struggle even for people in conventional circumstances, but can appear to be harder still for someone looking to apply under the Government’s Help to Buy scheme. With a smaller number of lenders catering to the Help to Buy market, each with their own individual criteria for borrowing and assessment methods, you might think that your choices will be quite limited, and will expect a tricky time in finding the right mortgage product for your circumstances.

The good news is that our team of mortgage brokers is expertly qualified, with decades of experience in all kinds of mortgages, and excellent relationships with a broad spectrum of lenders. While it would be impossible to give a list of the best lenders for Help to Buy mortgages here – as products are frequently introduced, changed or withdrawn, and we would need to understand your particular situation and needs – we are confident that we would be able to get you the most favourable deal to suit your circumstances and goals.

Help to Buy mortgage brokers

As someone looking for a new build property to need their needs – who might need help with a deposit large enough to access the most favourable mortgage rates and make their home affordable – the Help to Buy scheme continues to be an effective option. However, knowing which mortgage deal will be most compatible with your circumstances, and which lenders will offer the right conditions, can be a challenge.

To find out which mortgage product will present the best package for you, talk over your case with an experienced, professional mortgage broker like one of our team here at The Mortgage Centres. We have specialists in Help to Buy mortgages who have helped many prospective property owners get onto the housing market and into their brand new home. For expert, impartial advice and industry insights, call one of our team today and start your journey on the road to home ownership.


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