Help to Buy England

Posted 6 June 2016 by Keith Osborne

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

Help to Buy: Equity Loan

Help to Buy: Equity Loan is available for 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. You then receive a 20% loan from the government’s Homes and Community Agency to add as a deposit. The remaining 75% of the property price is paid for by a mortgage.


Working example

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


As with all the government initiatives, there are conditions and eligibility criteria you must fulfill with Help to Buy: Equity Loan. These include:

  • You cannot rent out your home once it is bought
  • It must be your sole/main residence where you intend to live
  • The property bought must be a new-build property worth up to £600,000


The 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 Retail Prices Index plus 1%.

If you decide to sell the property while still having the equity loan then the government would get 20% of the property sale price and you would receive 80%. Of course, you would still have to pay off the mortgage with the proceeds of the house sale.

To apply for the scheme contact your local Help to Buy agent or to search for any new home that qualifies for Help to Buy, always look for the Help to Buy logo in the listing. 


Help to Buy: Mortgage Guarantee

With a Help to Buy Mortgage, your lender is guaranteed that if you fail to repay your mortgage repayments, they will be compensated by the government. You will still lose the home if repayments aren't kept up but with this guarantee initially in place, the buyer can expect to receive good mortgage terms. In addition, the buyer can usually receive a higher loan-to-value mortgage because of the support in place.

For mortgage guarantee, you put down 5% of the purchase price as a deposit. You then take out a 95% mortgage with the lender that is partly guaranteed by the government. Of course, you still have to make the repayments as would be the case with any other mortgage.

This part of the scheme is available on new build and resale properties priced up to £600,000.


Help to Buy: Shared Ownership

Shared Ownership is a part-buy/part-rent scheme used for purchasing homes when it would be otherwise impossible to pay the full property price. The buyer purchases a share of the property (initially between 25% and 75%), then buys the rest of the 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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