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Help To Buy Mortgages

Over the years there have been a number of government-led schemes introduced to assist people in purchasing a property. Whilst the Mortgage Guarantee scheme offered to assist those with smaller deposits was withdrawn in 2016, this doesn’t mean that purchasing a property with a 5% deposit is no longer an option.

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How does Help To Buy work?

The Help to Buy Equity Loan scheme is a government-backed initiative introduced in 2013 to encourage home ownership. With the scheme, the government will lend you a 20% deposit (40% for London properties) and you will be expected to provide a deposit of at least 5% of the purchase price. A mortgage is required for the balance up to a maximum of 75% of the price of the property. The scheme is only available on New Build properties.  Interest isn’t charged on the government loan for the first 5 years. The maximum mortgage term available is 25 years for Help to Buy mortgages.

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Who can Apply for Help to buy?

To qualify for the Help to Buy scheme you must be resident in the UK, buying a property with a price of up to £600,000 and it must be the only home you will own. The property must be where you intend on living and you must be purchasing with a mortgage.

Who can’t apply for Help to Buy?

If you own more than one property or intend to let the property you will not qualify for the scheme.  If you live outside the UK or you are buying a property priced above £600,000 you will not qualify.  Cash buyers are not accepted on to the scheme. Help to Buy mortgages are not available on second-hand properties.

Help to Buy mortgages

Help to Buy mortgages are available to you if you have a 5% deposit available and you intend to buy a New Build property.  The maximum equity loan available is £120,000 (£240,000 if you are buying a property in London).  When you sell the property, 20% of the value is used to repay the equity loan.

Not all mortgage providers offers Help to Buy products but there are plenty of options in the market. Those that do will make an allowance for the future interest payable on the loan when calculating the amount you can borrow.  As it stands, the interest rate charged after 5 years is 1.75% of the equity loan. The rate will change to 1% above the Retail Price Index in subsequent years.

Help to Buy mortgage rates

The interest rates available for Help to Buy mortgages are really good. Remember, you only need to put down a 5% deposit but the government is providing a further 20% – so you are borrowing 75% of the value of your new home. If you are putting a 5% deposit down on a property independently of the scheme, you would be borrowing 95% of the value. The interest rates available are much lower at 75% loan to value than 95% loan to value. So to summarise, you will pay a much lower rate of interest for the same personal deposit.


Help to Buy mortgage calculator

Each mortgage provider will have their own affordability calculator which will assess the amount you can borrow based on your household income and expenditure. The mortgage provider will make an allowance for the future monthly interest charges due on the government loan after the first 5 years. In addition to this, the Help to Buy scheme has its own affordability calculator which may provide differing results from that of the mortgage provider. Your mortgage adviser will be able to compare the two calculators to give you an accurate idea of your borrowing capacity.

Help to Buy mortgage broker

Help to Buy mortgages can be complex and you need to know where to go to find them. Our experience in this market will help you find exactly what you need, so if Help to Buy is something you are considering, get in touch today and we will guide you through the process.

Help To Buy Mortgage Calculator

See How Much You Can Borrow

Use our help to buy mortgage calculator to see how much you could borrow against your next home.

Check Your Eligibility

Speak to an Experienced Adviser

Get in touch with your local Mortgage Centres office and speak to one of our experienced advisers. They will be more than happy to go over all of the above and more. A Help To Buy mortgage doesn’t have to be complicated. Let us do the hard work for you.

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Helpful Quick Guides

  • What is a government-backed equity loan?
  • How can I access help to buy?
  • How do I apply for a help to buy mortgage?
  • How much will a help to buy mortgage cost?
  • What should I watch out for?

A Help to Buy equity loan is a loan from the government of up to 20 percent of the cost of a new-build property. Equity loans are open to first-time buyers and home movers, but the property must be a new-build.

To qualify for an equity loan, you will have to contribute at least 5 percent of the purchase price as a deposit. You will then receive a loan from the government of up to 20 percent of the purchase price, meaning you’ll need a 75 percent loan-to-value mortgage to cover the rest.

There is no interest charged on the government loan for the first five years of property ownership. In the sixth year, you’ll be charged interest of 1.75 percent of the loan’s value. After this period, the fee will increase every year by the Retail Prices Index (RPI) plus 1 percent.

The loan must be paid back within 25 years, or when the property is sold, whichever comes first. However, it’s worth bearing in mind that if you sell the property, you will have to pay back 20 percent of the sales price, which could be more than originally borrowed if the property’s value has increased.

At The Mortgage Centres, we’re scanning the market daily for new mortgage products and better deals. So, if you are looking for an option that enables you to make the most of your deposit and get started owning your own home, then we can help.

Applying for the Help to Buy scheme is easy. If you’re applying for the equity loan, you must buy your home from a registered Help to Buy builder, and although the majority of developers are included in the scheme, some are not. Contacting your local Help to Buy agent can help you find a Help to Buy registered builder in your area.

Once you have found an eligible property, you should then speak to a mortgage broker who can organise a mortgage ‘decision in principle’ from a participating lender on your behalf.

There are a number of Help to Buy lenders out there, so prices will differ. However, as a guide, interest charges tend to range from 3 to 4 percent. There are also likely to be a number of charges attached to each deal, so it’s essential you take these into account before making a decision based purely on the headline rate. If you are signing up for the equity loan part of the scheme, you should also budget for the loan repayments you’ll have to make after year five.

In common with any mortgage borrowing, the main risk is that of rising interest rates. In addition, borrowers who apply for a 95% mortgage will have minimal equity initially and will be exposed to a negative equity position in the event of property prices falling. In other words, your house may be worth less than the value of your mortgage when you need to sell it.

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