Last edited 30 Sep 2016

Help to buy

This article was created in January 2015. Some of the figures quoted may be subject to change.


[edit] Introduction

The Government created the Help to Buy scheme to enable first-time buyers to get onto the property ladder and to support those moving up the property ladder.

There are four types of Help to Buy scheme:

[edit] Equity loans

Equity loans are available to first-time buyers and others moving to new-build homes in England, with a purchase price of up to £600,000.

The following criteria apply:

  • A deposit of 5% of the property price is required.
  • The government can loan up to 20% of the price.
  • The remaining 75% is covered by a mortgage.

There are no loan fee charges in the first five years. In year 6, a fee of 1.75% is charged and each subsequent year, the fee will increase based on the Retail Prices Index plus 1%.

The homeowner must pay back the loan after 25 years or when the home is sold, whichever is earliest. The amount that needs to be paid back is determined by the market value at that time. The loan can be paid back in part or in full at any time.

Applicants should contact a Help to Buy agent. The property must be bought from a registered Help to Buy builder.

[edit] Mortgage guarantees

The government can provide a guarantee to a mortgage lender, to help individual’s with a deposit of 5% purchase a home. The guarantee is open to both first-time buyers and others moving to a new home (new-build and older), with a purchase price of up to £600,000.

In order to qualify, the home must:

  • Have a purchase price of up to £600,000.
  • Not be a shared ownership or shared equity purchase.
  • Not be a second home.
  • Not be rented out after it is purchased.

The scheme cannot be used with interest-only mortgages or with any other publicly-funded mortgage schemes.

It is possible to apply directly to the following mortgage companies:

  • Aldermore Bank.
  • Bank of Ireland (Northern Ireland only).
  • Bank of Scotland.
  • Barclays.
  • Halifax.
  • HSBC.
  • Al Rayan Bank.
  • Lloyds Bank.
  • Natwest.
  • Post Office.
  • RBS.
  • Santander.
  • Ulster Bank.
  • Virgin Bank.

All of the mortgage lenders that participate in the Help to Buy scheme will check a person’s ability to make the repayments before they offer a mortgage.

NB In September 2016, the Chancellor confirmed that the Mortgage Guarantee Scheme would close to new loans on 31 December 2016. Ref Help to Buy helps over 185,000 people buy a new home, 29 September 2016.

[edit] Shared ownership

Housing associations provide shared ownership schemes where it is possible to purchase a share (between 25% to 75%) of a property. A mortgage is required for the share that is purchased, and rent is paid on the remainder.

It is possible to purchase a house through a shared ownership scheme if:

  • The household earns £60,000 or less, unless the property is in London where the maximum is £66,000 for a 1 or 2 bedroom or £80,000 for a 3 or more bedroom property.
  • The individual is a first-time buyer (or no longer can afford to buy one).
  • The individual rents a council or housing association property.
  • You are less than 55 (see below if over 55).

The ‘Older People’s Shared Ownership’ assists individual’s of 55 and over and is similar to the general scheme but it is only possible to buy up to 75% of the property. Once 75% of the home is paid off, rent is paid on the remaining amount.

The ‘Home Ownership for People with Long-Term Disabilities' (HOLD) can help individual’s with a long-term disability purchase a shared ownership property.

Once a house is purchased, it is possible to buy additional shares. The price of the new shares will reflect the current value of the property.

If the property is owned entirely by an individual, they may sell it and the housing association has the first chance to purchase the property for the first 21 years after the house is purchased. If only a share of the property is owned by an individual, the housing association can find a buyer.

It is possible to contact a local agent in the area to find out more about shared ownership schemes.

[edit] NewBuy

The Help to Buy NewBuy scheme is for new homes and for individual’s with a deposit of 5%.

It is possible to purchase a property with the NewBuy scheme if the new home meets the following criteria:

  • A new build.
  • A maximum property value of £500,000.
  • It is the main home.
  • It is owned by the individual.
  • IT is constructed by a scheme builder.

The individual must be a UK citizen or have the right to remain in the UK indefinitely.

It is possible to apply for a mortgage up to 95% of the purchase price, from an approved lender. NewBuy homes can be located within an area from the NewBuy website.

[edit] Find out more

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[edit] External references