Help To Buy

Help to Buy Mortgages

Help to Buy is primarily aimed at assisting first time buyers (and home movers) to buy a property. The scheme enables you to buy a property up to £600,000.

The property you are looking to buy will be your main residence and the property cannot be rented out. At the time of the application, you must not own another property anywhere in the world.

The mortgage must be on a capital repayment basis.

There are two types of Help to Buy Schemes:

  • Help to Buy 1 (Equity Loan) Scheme
  • Help to Buy 2  (Mortgage Guarantee) Scheme


Help to Buy 1 (Equity Loan) Scheme

The Help to Buy 1 (equity loan) scheme is only available on new build properties sold by property developers. If you are not interested in buying a new build property, then this scheme is not for you. The scheme is available to first time buyers and home movers with a maximum purchase price of up to £600,000.

You will need a deposit of least 5% of the purchase price. The government will provide an equity loan of 20% and you will obtain a 75% LTV mortgage from a lender that supports the scheme. This is the scheme that is applicable in England and there are similar schemes in Scotland, Wales, and Northern Ireland.

For example: Purchase price of property is £200,000

5% Deposit = £10,000

20% Government Equity loan = £40,000

75% LTV Mortgage = £150,000

100% LTV = £200,000 Purchase price

The government will put a charge on the property and they will be entitled to 20% of the value of the property when you sell. However, you do have the option to repay the loan and increase your share to 100% over the term of the mortgage.

There is no interest to pay on the government’s loan for the first five years. Thereafter, interest is paid at 1.75% of the loan amount, rising annually by the increase in the Retail Price Index plus 1%. Using the example above, if the equity loan is £40,000, using the interest rate of 1.75%, the yearly amount will be £40,000 x 1.75% = £700 / 12 months = £58 per month plus your monthly mortgage cost.

Assuming it’s 3%: £40,000 x 3% = £1200 / 12 = £100 per month in addition to your monthly mortgage costs. As such, you are encouraged to pay back the loan asap.

There are quite a number of Help to Buy schemes being promoted by developers. The developers at your chosen new build site will put you in touch with a Help to Buy Agent who will check your eligibility for the scheme and conduct a mortgage affordability assessment. It’s the same story everywhere: You need to demonstrate that you have done your homework in that you have met with a mortgage adviser and have a good understanding of how much you can borrow and afford each month.

For more information about the Help to Buy schemes, visit the following websites:


Help to Buy 1 (equity loan) Lenders

The majority of lenders do not support the government’s Help to Buy Equity Loan scheme. The lenders that do provide mortgages for this scheme are:

  1. Barclays
  2. Halifax
  3. Lloyds Bank
  4. Santander
  5. Virgin Money

The Help to Buy Equity Loan Scheme ends on the 31st of March 2016, but can be pulled earlier if the funds are fully utilised.

Help to Buy 2 (mortgage guarantee) Scheme

The Help To Buy 2 (mortgage guarantee) Scheme is designed to encourage lenders to offer high loan to value mortgages, i.e., up to 95%. It’s available on new build properties and existing properties up to a maximum purchase price of £600,000.

The mortgage guarantee is a private arrangement between the lender and the government, whereby the government covers the costs incurred by the bank in providing high loan to value deals. You need not concern yourself about the guarantee as it has nothing to do with you. All you need to focus on is how a Help to Buy 2 mortgage product compares with other products in the market. As such, the Help to Buy 2 is like a normal conventional mortgage.

Help to Buy 2 (mortgage guarantee) Lenders

The lenders that support the government’s Help to Buy (mortgage guarantee) scheme are:

  1. Aldermore
  2. Barclays
  3. Halifax
  4. HSBC (not on new builds)
  5. Lloyds Bank
  6. Post Office (Bank of Ireland)
  7. NatWest
  8. RBS (Royal Bank of Scotland)
  9. Santander
  10. Virgin Money

The Help to Buy Mortgage guarantee scheme will end on the 31st of December, 2016.




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