Help to Buy

Posted 20 September 2015 by Keith Osborne

An introduction to the Help to Buy purchase assistance scheme for England

Help to Buy is a government scheme to assist people buy a home, launched in 2013. It's open to homebuyers (both first-time buyers and home movers) in England who can provide a 5% deposit and is available on homes valued up to £600,000.

Download the Help to Buy Guide

There are two options to choose from - equity share or a mortgage guarantee.

Help to buy equity share

The shared equity option helps buyers by supplementing their 5% deposit with a loan of 20% of the value of the property, interest-free for five years. The loan is repayable at any time, or when the property is sold.

This part of the scheme is only available on new-build homes with participating housebuilders. There are currently hundreds of national and regional housebuilders offering this popular scheme on their new homes.

Mortgage guarantee

The mortgage guarantee option is open to those who can afford the repayments on a 95% home loan. A government guarantee encourages lenders to offer buyers with a low deposit access to affordable mortgages. Buyers still need to meet lenders' affordability criteria.

This part of the scheme is available on new-build and re-sale homes. It should be noted that since this option was introduced on 1 January 2014, there has been an increase in the number of 95% mortgages available which are not linked to the Help to Buy scheme and which offer competitive rates for those who can provide a 5% deposit.

Who can take part in the scheme?

The scheme is open to all homebuyers regardless of income, though you will undergo a financial assessment to establish that you will be able to afford mortgage repayments under the scheme. All Help to Buy mortgages are repayment mortgages, ie each monthly payment covers interest and capital. Typically, the mortgage will be based on a multiple up to 4.5 times your household income and the repayments calculated to account for no more than 45% of your net disposable income.

Help to Buy is only available on the purchase of a 'primary residence' and not to assist buy-to-let investors or those who own another property. You also cannot rent out your existing home and buy a second home through Help to Buy.

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