What is Help to Buy?
Help to Buy is a government-backed scheme that aims to help people who would otherwise struggle to save the amount needed for a deposit on a property, or who have limited equity, making it difficult to generate the funds to buy a new home.
The scheme is available on new build properties only and the details below relate to the Help to Buy Equity Loan scheme in England. There are separate schemes available for Wales and Scotland.
How it works
This scheme is open to first-time buyers who will need to have a deposit of at least 5%. The government will provide an equity loan that is put towards the cost of buying a newly-built house. Through the scheme buyers can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full price of the home. You will also need to arrange a mortgage for the outstanding amount. This means that you won’t pay interest on the equity loan for the first five years which should help to make the monthly mortgage costs more affordable during this time.
After the first five years, interest fees start at 1.75% on the Help to Buy loan and rise each year in April by the Consumer Prices Index (CPI) plus 2%. In addition, a monthly management fee of £1 is payable for the life of the equity loan.
You can find further information on a range of government schemes aimed at helping you buy a home of your own: www.ownyourhome.gov.uk
Take a look at our Mortgage Calculator to work out your monthly payment, just click on the button below:Mortgage Calculator
How will I pay back the loan?
The loan must be paid off when you sell the property, pay off the repayment mortgage, or if the loan term comes to an end. However, you can pay the loan off at any time before then – you might choose to pay more into the loan when you get a pay rise, or if you inherit a lump sum, for instance.
Is Help to Buy the right scheme for me?
Help to Buy has certain restrictions and stipulations, so it’s not open to everyone. You might be eligible for some elements and not others. You’ll also need to consider your own preferences too: the new scheme covers newly built properties, for example, which may not match your needs.