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Help To Buy Mortgages Explained
Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Updated: July 25, 2024With the Help to Buy scheme shortly due to close, naturally there’s a flurry of interest from first-time buyers. If you’d like to know more about equity loans and you need to learn the essentials quickly, you’re in the right place.
In this in-depth guide we’ll explain how the scheme works, who is eligible, and how to get a mortgage once your equity loan has been approved. If you need any more information, we can put you in touch with a Help to Buy expert.
*UPDATE 02/05/2023: The deadline to apply for a Help to Buy: Equity Loan has passed and the scheme has ended. Check out our guide to other government schemes for first-time buyers you can use.
Explained simply, Help to Buy is a government scheme to help first-time buyers with small deposits get a more affordable mortgage. The government provides an equity loan for a portion of the property price, which is interest-free for the first five years, so that you can get a smaller, cheaper mortgage on the remaining portion of the property.
There are some limitations:
If you’re buying in London, you can get an equity loan of up to 40% of the property value (meaning you’ll need a mortgage for up to 55%). Outside of London, you can get an equity loan of up to 20% of the property value (so you’ll need a mortgage of up to 75%).
To explain the scheme in numbers, let’s use the example of buying a £200,000 home.
Your mortgage repayments will be lower for two reasons:
Since the equity loan is interest-free for the first five years, you can be pretty sure you’ll save money for these five years (although you’ll pay a £1 monthly management fee).
The final deadline to apply is 31 October 2022. Within four working days, you will be given Authority to Proceed. From this point, you have three months to get your mortgage approved and exchange contracts. Your date of completion must be on or before 31 March 2023, when the scheme ends.
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In addition to your equity loan and deposit, you’ll need a mortgage. Less than half of UK lenders can provide mortgages that are compatible with Help to Buy equity loans, so their products are called Help to Buy mortgages.
Help to Buy mortgages are available in all the same variations as standard residential mortgages, so you can get a fixed-rate mortgage, a tracker mortgage, or a discounted variable-rate mortgage.
To access the Help to Buy initiative, you must be:
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Let’s look at the Help to Buy equity loan first, and then how much you can borrow for your mortgage.
Each region of the UK has a price cap, i.e. a limit on the total value of the property you can buy with Help to Buy, which is 1.5x the average forecast first-time buyer price for that region. The equity loan you can get in London is larger than outside of London.
So, the maximum equity loan in different regions is as follows:
| Region | Price cap | Equity loan % (up to) | Max. equity loan |
|---|---|---|---|
| North East | £186,100 | 20% | £37,220 |
| North West | £224,400 | 20% | £44,880 |
| Yorkshire and the Humber | £228,100 | 20% | £45,620 |
| East Midlands | £261,900 | 20% | £52,380 |
| West Midlands | £255,600 | 20% | £51,120 |
| East of England | £407,400 | 20% | £81,480 |
| London | £600,000 | 40% | £240,000 |
| South East | £437,600 | 20% | £87,520 |
| South West | £349,000 | 20% | £69,800 |
You can get a Help to Buy mortgage for up to 4.5x your annual salary (or, if you’re buying with another person, your combined salaries). For example, if your annual salary is £30,000, you could get a Help to Buy mortgage of up to £135,000. If you and your partner’s combined salaries are £60,000, you could get a Help to Buy mortgage of up to £270,000.
This table shows the salary needed to get a 55% or 75% mortgage of the maximum regional price cap:
| Region | Price cap | Mortgage % | Mortgage £ | Salary required |
|---|---|---|---|---|
| North East | £186,100 | 75% | £139,575 | £31,017 |
| North West | £224,400 | 75% | £168,300 | £37,400 |
| Yorkshire and the Humber | £228,100 | 75% | £171,075 | £38,017 |
| East Midlands | £261,900 | 75% | £196,425 | £43,650 |
| West Midlands | £255,600 | 75% | £191,700 | £42,600 |
| East of England | £407,400 | 75% | £305,550 | £67,900 |
| London | £600,000 | 55% | £330,000 | £73,333 |
| South East | £437,600 | 75% | £328,220 | £72,933 |
| South West | £349,000 | 75% | £261,750 | £58,167 |
If you’d like to see a more precise estimate for how much you could borrow, enter your salary (and your partner’s, if you’re buying with someone else) into the calculator below.
Our Help to Buy calculator can tell you whether the mortgage you need is affordable with your equity loan amount factored in.
Help to buy loan value:
Lower range borrowing:
Higher range borrowing:
Your maximum borrowing is unlikely to match the property price when combined with your deposit funds and equity loan. Speak to a broker to find out what options are available.
Now that you have a rough idea of your maximum borrowing with your Help to Buy equity loan factored in, it's a good idea to speak to a mortgage broker who specialises in the scheme. They can provide you with bespoke calculations and make sure your get the best deal with the time comes to apply for your mortgage.
There are three steps to successfully securing your mortgage before the deadline.
Step One: Step Two: Step Three:You’ll need to find a homebuilder who is registered with the Help to Buy scheme and view the properties they have available. Once you’ve found one you like, you can reserve it while you complete the other steps.
You can apply online to your regional Help to Buy agent. After they assess your eligibility, you’ll receive an Authority to Proceed. This allows you to apply for a mortgage and exchange contracts. You must complete this step before 31 October 2022.
Your Authority to Proceed expires after three months, so you’ll need to move quickly. To make sure there are no delays, it’s worth speaking to an expert in Help to Buy mortgages. They can advise you on which deal is best for you and help you avoid declined applications. Speak to a broker today.
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Many mainstream and specialist lenders offer Help to Buy mortgages. These include Nationwide Building Society, Accord Mortgages, Barclays Bank, Aldermore, NatWest Bank, and Halifax Building Society.
Which lender provides the best Help to Buy mortgage depends on your personal circumstances. Your source of income and credit history are two major factors, as different lenders may take different views on your creditworthiness. It’s best to speak to a broker if you need help comparing mortgages.
If you decide that Help to Buy isn’t right for you, you might consider two other government schemes:
The Mortgage Guarantee Scheme Shared OwnershipUntil the end of 2023, the government is providing an incentive to lenders to offer 95% mortgages, by guaranteeing the portion over 80% (so the lender is not at risk of loss on this portion). This means you could be able to get a 95% mortgage without an equity loan. Read more about 95% mortgages.
Through the Shared Ownership scheme, you can buy a share in a home worth between 10% and 75% of its market value. The remaining share will be owned by a housing provider, who will charge you rent at a reduced rate. Read more about Shared Ownership.
When you sell your home, you’ll need to pay off the government equity loan. The amount you owe is not necessarily the amount you borrowed. If you borrowed 20% of the purchase price of the property, you owe the government 20% of the selling price of the property.
For example, if you bought the property for £200,000, with an equity loan of £40,000, and you are selling the property for £220,000, you owe the government £44,000. Your house has increased in value by 10%, so the repayment due has increased by 10% too.
When you want to sell your home, you’ll need to notify Target, the agency that handles administration for HCA, the organisation that provides the loan. You’ll need to arrange a surveyor’s valuation and send this to Target, along with the offer you’ve received. You’ll pay an admin fee of £200.
Remortgaging a home you bought with help to Buy can be difficult. Very few lenders offer Help to Buy remortgage deals, particularly if you have not yet paid off your equity loan. Those that do might charge higher fees and rates to Help to Buy customers. You will also need to pay a remortgage fee of £115 to the Help to Buy scheme.
So, you’ll need to consider if the costs of remortgaging outweigh the costs of sticking with your current mortgage once it has deferred to your lender’s standard variable rate. This maths can be complicated, so you may want to speak to a broker to get their expert opinion.
To find out more see our dedicated article on remortgaging after using a Help to Buy scheme.
Not all brokers can help you proceed with a Help to Buy mortgage application. You’ll need a broker who has ‘whole of market’ access, and it will be extremely helpful if they have previous experience with the scheme.
We work with numerous brokers who are Help to Buy specialists. If you’d like their expert advice, we can put you in touch for a free, no-obligation chat. First, we’ll just need a few details about you and your mortgage. To get in touch, either call us on 0808 189 2301 or enquire online.
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The government has not yet announced any plans to extend or replace the scheme once it ends in 2023. So, if you’d like to buy a home with a Help to Buy equity loan, it’s crucial to get your application in before the end of October 2022.
As a first-time buyer, you’re entitled to stamp duty relief if you buy a home for less than £300,000. That means that the Help to Buy customers in most regions will pay no stamp duty.
If you buy a home worth between £300,000 and £500,000, you’ll get a first-time buyer discount of £5,000 on the stamp duty for the property. If you’re buying a home worth over £500,000 (which only applies to Help to Buy customers in London), you’ll get no reduction in stamp duty.
Finding a buyer won’t necessarily be harder, as you can sell your home on the open market like any other. The selling process is a little more complex if you haven’t yet repaid your equity loan, as you’ll need to do that now. This can add to the time and cost of selling your home.
Yes, the Welsh government is running a very similar scheme to that which was available in England. If you live in Wales and want to take advantage of this scheme, the latest phase (3) will remain open until March 2023. The scheme provides an equity loan equal to 20% of the purchase price (up to). To qualify you must also have at least a 5% deposit of your own and use a repayment mortgage for the remaining balance.
No, the Help to Buy scheme in Scotland is now closed. However, the Low Cost Initiative for First-Time Buyers Scheme (LIFT) is still available. If you’d like more information as to how this works, get in touch and we’ll arrange for one of our brokers to contact you directly.
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About the author
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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