Help to Buy England

Posted 30 December 2016 by Keith Osborne

What is the Help to Buy scheme and how does it work?

Help to Buy: Equity Loan

This government scheme is available on new build properties costing up to £600,000. If you qualify for the scheme then you put down 5% of the purchase price of a new home and receive a 20% equity loan from the government, leaving you to find a mortgage for the remaining 75% of the property price.


Working example

Property price £400,000 (100%)
Initial deposit £20,000    (5%)
Equity loan     £80,000    (20%)
Remaining mortgage  £300,000    (75%)


There are just a few criteria for the scheme: you must be purchasing your only home, and it must be your main residence, and you cannot rent out the home.
The equity loan is interest-free for the first five years then charged at 1.75% of the loan's value for the sixth year. From the seventh year that rate increases by the Retail Prices Index plus 1%.
The equity loan must be paid back when the property is sold, or at the end of the mortgage. It is repayable as a percentage of the property price at the time of sale, so if the price has gone up, you will pay back more, and if the price has gone down you will pay less – it will still be 20% of the property price.
To apply for the scheme contact your local Help to Buy agent.


Help to Buy: Shared Ownership

Under the Help to Buy ‘umbrella’ brand, Shared Ownership is a part-buy/part-rent scheme for purchasing homes that is open to people who are unable to buy a suitable property on the open market. The buyer purchases a share of the property (initially between 25% and 75%), paying rent on the remainder, and is able to buy further shares (known as ‘staircasing’) over time until 100% of the property is owned.
A subsidised rent (approximately 80% of the market rate) is paid on the part of the property not purchased, and the buyer must also pay 100% of ground rent and service charge.
Only certain properties are available for Shared Ownership, usually released by the local authority or by a housing developer as part of a new homes development.


Find out the details of the Shared Ownership scheme here.


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