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Help to Buy Mortgage

This scheme helps applicants looking to purchase a new-build home, who have at least a 5% deposit payment available. The government provides a ‘top-up’ against your deposit value, to the equivalent of up to 20% of the saleable property value up to £120,000 max.

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Lending for Help to Buy Schemes

The Help to Buy scheme provides equity loans throughout England, with alternatives available in Scotland, Wales and Northern Ireland.

How Help to Buy schemes work

This maximum is extended to 40% of the property value up to £240,000 in London, and the maximum value property for any Help to Buy applicant is £600,000 across England. On a £120,000 value property, if you have a 5% deposit payment and obtain Help to Buy funding, you would require mortgage lending for the remaining 75% of the value.

Repayments on a Help to Buy mortgage

Repayments are made to the mortgage lender as normal. The equity loan through Help to Buy does not incur any interest over the first five years and does not require regular payments aside from £1 per month management fee, payable via Direct Debit. After the first five years, an interest rate of 1.75% comes into effect and increases annually at the same rate as inflation plus 1%. The equity loan can either be repaid in instalments of at least 10% or can be repaid when the property is sold. The maximum loan term for a Help to Buy loan is 25 years. The repayments made are based on the current value of the property and not the original equity loan value. This is important to consider since you will need to repay the same percentage value as you borrowed, regardless of how much the property value has increased in the interim. For example, if you buy a £300,000 property and borrow 20% of the value, you will receive lending of £60,000. If you then come to sell the property and repay the equity loan and the property is now worth £400,000 you will still need to repay 20%, i.e. £80,000.

Applying for a Help to Buy mortgage

The first step in accessing a Help to Buy loan is finding a lender who participates in the scheme. It may be that you need a specialist lender, depending on your circumstances and what sort of mortgage you wish to apply for. To apply, you will need to undergo an affordability assessment through both your mortgage lender and through the Help to Buy scheme. It is therefore essential to work with a mortgage lender who understands and supports the scheme to ensure the eligibility criteria are compatible. If you are in any doubt as to who the best lender is for you, or which lenders support the Help to Buy scheme, give the Revolution Finance Brokers team a call today!

Qualifying for a Help to Buy Loan

The government has a few eligibility criteria:

  1. You are a first-time buyer, or a homeowner wanting to move house
  2. The property is a new-build and is not worth over £600,000
  3. Your purchase is not a buy-to-let, will not be sub-let, and is not a part exchange for your existing home
  4. You do not own any other property, or your Help to Buy property will be the only property you own
  5. You are buying a property in England (there are separate schemes for buyers in Wales, Scotland and Northern Ireland)
  6. You have at least a 5% deposit

For buyers in London, the criteria are the same, aside from the maximum equity loan value being increased from 20% to 40% of the property value.

The Help to Buy application process

Before selecting a property or making any offers, it is crucial to make sure that you are eligible for the scheme. We have set out the basic requirements here, but you can find more detailed criteria on the Help to Buy website or give our team a call for support in understanding whether you can apply. Once you know that you can apply, you will also need to ensure that your purchase budget falls within the £600,000 maximum property value and that you have the deposit available.

Alternative schemes

Help to Buy is not the only scheme available to help buyers get onto the property ladder. Other schemes include Social HomeBuy, whereby social housing tenants in some areas can apply to purchase a proportion of at least 25% of their property. This scheme offers a discounted price of up to £16,000 on the percentage of the property you buy and offers reduced rental rates on the remainder of the property value. If you are looking for the best scheme to help you purchase your home, please give us a ring and let us know a little about your circumstances. Revolution Finance Brokers work to match every client with the most cost-effective and secure mortgage option to help you buy your perfect property!

Mortgage rates for Help to Buy

The interest rates offered by mortgage lenders for buyers accessing the Help to Buy scheme will vary. You will need to select a lender who accepts Help to Buy applicants, so do your homework first – or get in touch with us – to make sure you aren’t wasting any time. Most lenders will consider the equity loan to form part of the deposit, which helps them to offer a lower interest rate. If you have the minimum 5% cash deposit and have a 20% Help to Buy loan, this means your lender will consider your application as having a 25% deposit which will afford you much more competitive rates. Depending on the lender, the mortgage terms will vary and tend to align with the market standard. Some mortgages will require higher fees to set up alongside a Help to Buy loan, and others will offer additional benefits such as cashback. Making sure you choose the right lender is crucial, so if you are in any doubt do get in touch and we will be more than happy to help.

Joint ownership

Another way to help buyers, particularly first-time buyers, get onto the property ladder is shared ownership. The Help to Buy scheme does consider shared ownership applications and is intended to help:

  1. First-time buyers
  2. Previous property owners who now cannot afford to buy

Existing shared owners of properties who wish to move home The eligibility criteria require applicants to have an income of less than £80,000 per annum per household, or £90,000 in London. Shared ownership through Help to Buy enables you to purchase a proportion of a property, usually up to 75%, and pay rent for the remaining proportion of the property to the local housing association. Help to Buy for shared ownership purchases is available for both new-build and existing properties. There are alternative schemes for buyers in Wales, Scotland and Northern Ireland and alternatives for buyers aged over 55 and those with long-term disabilities. If any of these criteria apply to you, and you are seeking help with purchasing your property, get in touch and we will help you to get the ball rolling.

Buying a new-build through Help to Buy

The Help to Buy scheme is aimed primarily at new-build properties, since these provide better energy efficiency ratings and are usually safer and cheaper to manage than older residences. The attraction of avoiding a potentially long-winded property chain, and added incentives to purchase new-build properties through developers, makes this a very competitive option for first-time buyers.

Help to Buy and poor credit ratings

Not everybody has a perfect credit rating, and the Help to Buy scheme now accepts applications from people who would previously not have been eligible. This includes:

  1. Applicants who have been declared bankrupt, but have been discharged from this status for at least one year.
  2. Applicants who have an IVA in place and are maintaining repayments.
  3. Applicants who have previously been in arrears with their mortgage, but have been able to keep up to date within the last twelve months.

For applicants who have a poor credit rating, the scheme will require a larger 10% deposit in comparison to the standard 5%.

Finding a Help to Buy lender

It is critical to find the right lender if you wish to access the Help to Buy scheme. Not every mortgage lender participates, and within those that do you need to find the lender who offers the optimal mortgage with terms and rates that match your budget. Give the team at Revolution Finance Brokers a call today or drop us an email, and we will be delighted to help you find the right lender, with the right terms, and the right interest rates that will help you get onto the property ladder.

FAQs

What is the Help to Buy mortgage application process?

The Help to Buy scheme is intended to help more people get onto the property ladder. The first step in the process is to ensure you are eligible, and meet the criteria to be able to apply. Once you have confirmed that you are eligible, the next step is to look at what deposit you have available, and calculate your monthly repayments to ensure these are affordable. If the sums add up, you can begin the application process. It is important to understand the limitations on the value of a home eligible for the Help to Buy scheme, so as not to submit an application for a property valued at over £600,000.

Are there other affordable home ownership schemes?

Yes, Help to Buy is the English scheme but there are comparable schemes in Scotland, Wales and Northern Ireland. Other options include the anticipated Starter Homes scheme, which you can register interest in prior to the launch. Starter Homes is similar to Help to Buy in that it is aimed at helping first-time buyers invest in their first property. The criteria are that buyers are aged under 40 years old, and are looking to purchase a property valued at no higher than £450,000 in London and no more than £250,000 elsewhere. Social HomeBuy is another scheme, which is administered directly by local authorities and housing associations. This helps residents in social housing purchase a proportion of their home.

What are the interest rates on Help to Buy mortgages?

Different lenders offer different rates, so there is no fixed interest rate payable on a Help to Buy mortgage. Help to Buy is a specialist product, so will be available at different rates than more standard residential mortgages. For help finding the right lenders and the most competitive rates for Help to Buy, give us a call and we will be delighted to help!

Is Help to Buy possible for shared ownership?

Yes, Help to Buy is open to applications from existing shared owners who are looking to move. Your income needs to be under £80,000 per annum for the household, or less than £90,000 per annum in London. The scheme helps buyers to purchase a proportion of their home, and pay rent on the remaining percentage.

Can you buy a new build with Help to Buy?

Yes, you can! Help to Buy is targeted at new build homes, since these are more cost effective and energy efficient so offer a more viable opportunity for first-time buyers. Buying a new build property also offers the benefits of not having to become involved in a property chain, and being able to take advantage of the benefits and promotions offered by developers looking for buyers for new build developments.

Can I use Help to Buy if I have poor credit?

You can - Help to Buy does not exclude applications with a bad credit history. However, you will need to be able to demonstrate that your finances are now under control to be able to secure a Help to Buy mortgage. For example, if you have been bankrupt then you will need to have had your bankruptcy discharged for at least 12 months before applying.

Check out our handy calculators

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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