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Understanding Borrowing Limits on the Help to Buy Scheme

Help to Buy is a scheme that has helped thousands buy their home with a boosted deposit and lower interest rates. Here we unpick the borrowing limits and how that impacts your choice of residential property.

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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Understanding Borrowing Limits on the Help to Buy Scheme

The Help to Buy scheme helps many people get onto the property ladder, and find affordable mortgage borrowing.

However, before you start making applications and looking for a property, you need to know what you can borrow, the caps on property values, and how much you can apply for as an equity loan.

The Revolution Brokers team has created this guide to explain all the limits you should be aware of. For more help with securing competitive Help to Buy lending, give us a call on 0330 304 3040, or email the team at [email protected].

What is the Maximum I Can Borrow Through Help to Buy?

There are a few limits to be aware of:

  • The equity loan can be up to 20% of the value of the property.
  • You must contribute at least a 5% deposit.
  • The mortgage element needs to be for at least 25% of the purchase price.
  • Your deposit contribution and the mortgage together must be at least 80%.

In London, the limits are slightly different:

  • You can borrow up to 40% through the equity loan.
  • The mortgage still needs to be for at least 25%.
  • Your mortgage and deposit together need to be at least 60%.
  • The maximum property value is £600,000.

The maximum Help to Buy loan value is £120,000 in England and Wales, with a higher cap of £240,000 in London.

As an illustration:

  • You are buying a property worth £200,000 and have a 5% deposit.
  • You borrow £40,000 as an equity loan.
  • The cash deposit is £10,000.
  • The balance of £150,000 is funded through a mortgage.
The following
topics are
covered below
Topics

Do Limits Apply to a Remortgage on a Help to Buy Mortgage?
How do Lenders Calculate Affordability on Help to Buy?
What are the Repayment Terms on a Help to Buy Mortgage?
Expert Advice on UK Help to Buy Borrowing
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Do Limits Apply to a Remortgage on a Help to Buy Mortgage?

If you decide to refinance, the maximum you can borrow is calculated on the usual affordability calculations used for any mortgage.

The only variable is that your equity loan balance will carry over unless you remortgage and raise capital to repay the loan.

How do Lenders Calculate Affordability on Help to Buy?

Lenders will need you to have a 5% deposit to apply for a Help to Buy mortgage - although you can contribute up to 65% of the property value, with a 10% Help to Buy loan and the minimum mortgage value of 25%.

Your application will include information about the property you want to buy, what deposit you have available, and how much you can earn.

Typically, lenders can offer up to 4.5 times your annual income, and your expenses need to be within 45% of your monthly disposable income.

What are the Repayment Terms on a Help to Buy Mortgage?

The loan element is interest-free for five years but carries a £1 monthly nominal fee payable to Homes England.

After five years, you are charged interest at 1.75% in year six, which increases each year in line with the Retail Price Index, plus an additional 1%.

You must repay a Help to Buy loan within 25 years, or whenever you sell the property.

It is essential to note that, whatever proportion of your property is funded through an equity loan, you will need to pay back this same proportion when you repay, calculated against the current market value of your home.

Expert Advice on UK Help to Buy Borrowing

Not sure whether Help to Buy is your best bet - or uncertain whether a property you'd like to purchase falls within the borrowing limits?

Give mortgage advisors a call on 0330 304 3040, or email us at [email protected] and we'll get the ball rolling!

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Further Reading

Bad Credit Mortgages with the Help to Buy Scheme
Best UK Rates on Help to Buy Mortgages
Can I Get a Help to Buy Mortgage in Scotland?
Can I Get a Help to Buy Mortgage in Wales?
Comparing Help to Buy Mortgage Rates
Mortgage Guarantees for Help to Buy Applicants
Understanding Borrowing Limits on the Help to Buy Scheme
Can I Use Help to Buy More Than Once?
Mortgage Calculator for Help to Buy Borrowing

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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