What is ‘Help To Buy’ and how does it work?
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What is ‘Help To Buy’ and how does it work?

Help to Buy covers a range of government schemes intended to help first-time property buyers to make a purchase with as little as a 5% deposit. This guide will break down the schemes and explain how they work and who each is for.

Help to Buy: Equity Loan

With a Help to Buy: Equity Loan, the government provides a 20% loan on the value of the property. Coupled with a cash deposit of at least 5%, this means that you only need a 75% mortgage to make up the remainder – meaning that you could buy a £200,000 house with a £10,000 deposit. What’s more, the government loan is fee-free for your first five years of home ownership. Reflecting higher property prices in London, the government loan available increases to 40% in the city, meaning that buyers only need a 55% mortgage. One limitation of the scheme, though, is that it requires you to take out a repayment mortgage (rather than an interest-only mortgage, for example).

During the term of the loan you are not allowed to sublet the property; you cannot increase your mortgage or extend the property without permission; and if you wish to buy a second property you must repay the loan in full.

Help to Buy: Equity Loan – who’s it for?

The scheme is for first-time buyers in England, buying a newly built property priced at under £600,000 (though there are similar schemes in Scotland, Wales and Northern Ireland with thresholds at £230,000, £300,000 and £600,000, respectively). You cannot use the scheme to buy a second home or a buy-to-let.

We have created this short animation to explain the features and benefits of the Help to Buy Equity loan scheme

Help to Buy: Shared Ownership

Shared Ownership allows you to buy a part-share in a property and pay rent on the remainder. This allows buyers to take a stake in a property for 25% to 75% of the purchase price (combining a deposit and mortgage to make up this value). The scheme only applies to leaseholds and to properties that are either newly built, or that are being resold by housing associations.

Help to Buy: Shared Ownership – who’s it for?

The scheme only applies in England and is open to first-time buyers, people who have owned a property but are no longer able to buy one, and to current shared owners. In all cases, your household must earn a total of less than £90,000 a year if you live in London, or £80,000 a year if you live elsewhere in England.

If you are aged 55 or older, under the Older People’s Shared Ownership scheme there is no rent to pay once you reach a 75% ownership stake. Meanwhile, the Home Ownership for People with Long-Term Disabilities (HOLD) scheme is available for individuals who find that existing provisions do not meet their needs.

Help to Buy: ISA

The Help to Buy: ISA scheme, meanwhile, helps individuals save towards the purchase of a home, boosting savings of between £1,600 and £12,000 by 25%. This means that you can receive a bonus ranging from £50 to £3,000 – or, if you combine savings with a partner, of up to £6,000. When making a purchase, your solicitor or conveyancer can then apply for the bonus to be put to the purchase price of the property. The bonus can be applied to UK properties bought with a mortgage and priced at less than £250,000 (or £450,000 in London) – and the property must be the buyer’s home and only owned property.

Help to Buy: ISA – who’s it for?

To be eligible, you must be a UK resident, aged 16 or over, with a valid National Insurance number. You must not own any other property anywhere in the world or have any other active cash ISAs in the same tax year.