Help-to-Buy Mortgages explained

10th April 2019

Looking to buy your first home? You may have already heard about the Help-to-Buy scheme but may not know how it works or how to qualify. We’ve got you covered with this Contractor’s guide to Help-to-Buy mortgages.


What is a Help-to-Buy Mortgage?

Help-to-Buy is a government scheme designed to help first-time buyers (or home movers with limited equity) to secure their new home. Under the Help-to-Buy scheme, you only need to provide a 5% deposit of the property price. The government will then boost the deposit amount with an equity loan.


There are currently two schemes under the Help-to-Buy: an equity loan and a shared ownership scheme.


Equity Loan

As mentioned, if you put down a deposit of a least 5% on a new-build property, the government can lend up to a further 20%, creating a total deposit of 25% of the property price. If you’re looking to purchase a property in London, the government can lend you up to an additional 40%, creating a deposit of 45%.

The government part of the loan is interest-free for the first 5 years, however, from year 6 you will currently be charged interest at 1.75% – be aware that this rate can change due to inflation.

If you decide to sell the property, you will have to pay the government back 20% of your home’s value at that point in time – whether the value has increased or fallen. However, you can repay the government loan before the sale of your house. Be aware though that in this circumstance there may be an overpayment charge. An adviser can help you decide if an Help-to-Buy equity loan is the best option for you.


Shared ownership

Shared ownership helps buyers who can’t afford a mortgage on 100% of a property. It allows you to purchase between 25% and 75% of your home’s value and pay rent on the remaining share. In the future, you may have the option to buy a bigger share of the home. Currently, this scheme is only available in England. More information about shared ownership can be found here.



Please be aware that the current Help-to-Buy equity loan scheme is due to end in 2021 and a revised version will be available until 2023. There are no plans for the scheme post April 2023, so if you’re looking to purchase a property under this scheme now might just be the best time. Get in touch with our expert mortgage advisers to understand more.


All content is accurate at the time of publication

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