Am I eligible for the Help to Buy scheme?
The Help to Buy scheme is only be open to first time buyers. This means if you have owned a home previously, or own a home at the time of applying, you will not be eligible.
The price of eligible properties are be capped by region. For Yorkshire, the purchase price is capped at £228,100. Properties on sale for a higher price will not be eligible.
The maximum equity loan amount given by the government for purchases outside of Greater London is 20% of the purchase price. The minimum buyer’s deposit is 5%.
The process of buying a home can take several months, so it’s important to give yourself enough time to take advantage of the scheme.
How does the Help to Buy scheme work?
Help to Buy allows you to own 100% of your home and only pay 80% up front. You will need to provide a 5% deposit and the government will then lend you up to 20% as an equity loan. You would then need to apply for a mortgage based upon the remaining 75%
The table below gives an example of using Help to Buy to buy a £190,000 home.
Cash Deposit 5% £9,500
Equity Loan 20% £38,000
Mortgage 75% £142,500
When does the Help to Buy scheme end?
The Help to Buy scheme for first time buyers will run from 1st April 2021 until 31st March 2023. After this date, the Help to Buy scheme will close to new applications.
What are the regional price caps for Help to Buy?
In an attempt to help first time buyers onto the property ladder, the Help to Buy scheme features regional price caps based on average starter home prices in the area. Each average price is multiplied by 1.5 to calculate the cap. Properties over each regional amount will not be eligible for the scheme.
Regional price caps for the Help to Buy scheme from April 2021:
North East - £186,100
North West - £224,400
Yorkshire and The Humber - £228,100
East Midlands - £261,900
West Midlands - £255,600
East of England - £407,400
London - £600,000
South East - £437,600
South West - £349,000
How does the new Help to Buy scheme work?
If you’re a first-time buyer in England, you can apply for a Help to Buy: Equity Loan. This is a loan from the government that you put towards the cost of buying a newly built home. You can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.
To use the Help to Buy scheme, there is an eligibility criteria you have to meet. Take a look at the criteria here:
The Help to Buy scheme will only be open to first time buyers. This means if you have owned a home previously, or own a home at the time of applying, you will not be eligible.
The price of eligible properties will be capped by region. For Yorkshire, the purchase price is capped at £228,100. Properties on sale for a higher price will not be eligible.
The maximum equity loan amount given by the government for purchases outside of Greater London will still be 20% of the purchase price. The minimum buyer’s deposit is still 5%.
What happens with your Help to Buy loan after the 5 years?
After 5 years of taking out your Help to Buy equity loan, there are a few changes to note.
You continue to pay £1 monthly management fee.
You start to pay a monthly interest fee of 1.75% of the 20% equity loan.
Your interest fee will rise each year in April (RPI) plus 1% until you repay the loan.
You will continue to pay interest until you repay your loan in full.
You must also repay your equity loan in full. This happens at the end of the equity loan term, when you pay off your repayment mortgage or when you sell your home.
If the market value of your home rises, so does the amount you owe on your equity loan. If the value of your home falls, the amount you owe on your equity loan falls too.
How does a Help to Buy mortgage work?
The mortgage you take out on your home will be for 75% of the properties value. For example, if you purchased a home at £190,000, your mortgage would be for £142,500.
You will have paid a 5% deposit and the other 20% is an interest-free loan. Your 75% mortgage works similarly to a regular mortgage - you have set payments each month. You take out a help to buy mortgage, typically for 25 years.
How does Help to Buy work when selling your home?
When/If you decide to sell your current home that you bought using help to buy, you will have to repay your equity loan at the same time.
The 20% loan you initially took out will have to be re-paid – if it’s been less than 5 years, the loan will still be interest free, however if it’s after 5 years, you’ll have to pay any additional interest that has incurred on the loan.
For example, if you bought a home at £200,000 and you sold it for £210,000, you’d have to re-pay your 20% equity loan at £42,000 and your 75% mortgage at £150,000.
When does Help to Buy scheme end?
The new Help to Buy scheme officially ends March 2023.
Can Help to buy be used on any new build home?
Yes – the Help to Buy scheme is only available on new build homes.
The scheme is designed to allow anyone looking to buy a house an opportunity to dive onto the property ladder. It’s a great opportunity to get on the ladder with a low deposit. Currently available to both first time buyers and second steppers, the scheme is available only on new build homes.