What are Help to Buy Mortgages
The government has created the Help to Buy Mortgage schemes including Help to Buy: Shared Ownership and Help to Buy: Equity Loan to help hard-working people take steps to buy their own home. With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
You won’t be charged loan fees on the 20% loan for the first five years of owning your home.
To qualify for this equity loan, the home you are looking to buy must:
- Be a new build
- Have a purchase price of up to £600,000 in England (or £300,000 in Wales)
- Be the only property you own
- Not be sub-let or rented out after you buy it
- Be a property that you can prove you can’t afford (if you’re applying in Wales)
How it works
With an equity loan:
- you need a 5% deposit
- the government will lend you up to 20% (up to 40% in London)
- you need a mortgage of up to 75% for the rest (up to 55% in London)
You must buy your home from a registered Help to Buy builder - your agent should have a list.
Example
| For a £200,000 property | Amount | Percentage |
| Cash deposit | £10,000 | 5% |
| Equity loan | £40,000 (£80,000 in London) | 20% (40% in London) |
| Mortgage | £150,000 (£110,000 in London) | 75% (55% in London) |
Equity loan fees
You’ll have to pay equity loan fees, but not for the first 5 years.
In the sixth year, you’ll be charged a fee of 1.75% of the loan’s value. The fee then increases every year, according to the Retail Prices Index plus 1%.
Your Help to Buy agent will contact you to set up these monthly fee payments. You’ll also get a statement about your loan each year.
Fees don’t count towards paying back the loan.
Paying back the loan
You must pay back the loan after 25 years or when you sell your home - whichever comes first. The amount you pay back depends on how much your home is worth (the market value).
Example
| Market value of your home | Equity loan | Amount |
| Bought for £200,000 | 20% | Borrowed £40,000 |
| Sold for £250,000 | 20% | Pay back £50,000 |
You can pay back part or all of your loan at any time. The smallest repayment you can make is 10% of the market value of your home.
Example
| Market value of your home | Percentage | Amount |
| Bought for £200,000 | Borrowed 20% | £40,000 |
| Value at time of payment £220,000 | Paying back 10% | £22,000 |