A Guide To The Help To Buy Scheme

Tuesday, 26th October 2021

For first-time buyers, purchasing a home can be a rollercoaster of emotions. It’s exciting as it is daunting and there are several ways to make getting your first home less stressful. One way is to invest in a Help To Buy programme, which is designed to make the home buying process less stressful for first-time buyers.

In this article, we’ll tell you everything you need to know about the Help To Buy Scheme.

What is Help To Buy? 

Help To Buy is a government programme set up to help first-time buyers purchase a property at a more affordable rate. While there are a few different types of Help To Buy plans, the most relevant is a Help To Buy equity loan and Help To Buy Wales.

 

Help To Buy equity loan explained 

A Help To Buy equity loan is a loan provided by the government that can be combined with a deposit and a mortgage to purchase a new-build property. Depending on where you live in the UK, you can borrow between 15% and 40% of the house price and you’ll need to put down a deposit of at least 5% and get a mortgage to cover the rest of the property’s value.

Here is the borrowing criteria:

  • Up to 40% in London
  • Up to 20% in the rest of England and Wales

Keep in mind that if you’re planning to use a Help To Buy loan in the North West of England, there is a maximum price cap of £225,000. 

 

Help To Buy equity loan explained 

A Help To Buy equity loan is a loan provided by the government that can be combined with a deposit and a mortgage to purchase a new-build property. Depending on where you live in the UK, you can borrow between 15% and 40% of the house price and you’ll need to put down a deposit of at least 5% and get a mortgage to cover the rest of the property’s value.

Here is the borrowing criteria:

  • Up to 40% in London
  • Up to 20% in the rest of England and Wales

Keep in mind that if you’re planning to use a Help To Buy loan in the North West of England, there is a maximum price cap of £225,000. 

 

How does a Help To Buy equity loan work? 
  1. You put down a deposit of at least 5%
  2. The government lends you up to 20% of the home’s value as an equity loan
  3. You take out a mortgage on the rest of the property’s value (e.g. 5% deposit and 20% loan would mean you take out a 75% mortgage) 
  4. After a five year period you begin paying interest on the government loan

 

Who is eligible for Help To Buy equity loans? 

The Help To Buy scheme was launched in 2013 and since April 1st 2021, Help To Buy has only been available to first-time buyers, with regional price caps set up to limit the cost of houses sold through the programme. The scheme is set to run until 31st March 2023.

Help To Buy equity loans are exclusively available to people who want to buy a new-build property. 

Help to Buy equity loans are only available on new-build properties, so if you want a modern home, a Help to Buy equity loan could be a good way to reduce the size of the mortgage you take out.

 

How do you apply for a Help To Buy equity loan? 

To apply for a Help To Buy loan, you’ll need to meet the following criteria:

  • Be a first-time buyer
  • Have a deposit of at least 5% 
  • Be purchasing a property for less than the price cap in your region
  • Intend to live in the house for most of the time, not let it out or use as a second home
  • Take out a mortgage with a term or no longer than 35 years 

 

How do you repay a Help To Buy loan? 

You are required to pay the equity loan in full after 25 years, when the mortgage term finishes or when you sell the house. As the loan is for a percentage of the house price instead of a set cash value, you’ll repay the market value of the loan at the time.

This means you won’t pay the amount you originally borrowed and you can repay part of the loan early of either 10% or 20% of the total property value. 

 

Help To Buy Wales explained

How To Buy Wales is an equity loan programme for first-time buyers and existing homeowners in Wales. It helps to buy new-build properties with deposits as small as 5%.

The Welsh government provides a loan of up to 20% of the property’s value. This means you only need to get a mortgage for the remaining 75% and you may unlock more attractive rates from lenders. 

Be aware that the maximum price of homes sold under Help To Buy Wales is £250,000. 

 

How do you apply for Help To Buy Wales? 
  • You can only buy a new-build or off-plan property. Remember that if you purchase off-plan you’ll generally need to complete no more than six months after the exchange of contracts. 
  • The house you’re buying must be your main residence. If you sell the house before paying the loan back, the government is entitled to a proportional share of its equity.
  • Remember that the Welsh properties under the scheme are capped at £250,000. This is different from England, where you can buy a property up to £600,000 depending on where you live in the country. 

 

How do you pay off a Help To Buy Wales loan? 

The loan given by the Welsh government is interest-free for the first five years. From the sixth year interest is charged at 1.75%. You’ll also be charged an administration fee of £1 a month. 

With the loan being a percentage of the property’s value rather than a set amount, you’ll need to pay back the same percentage of the sale price (20% if a full loan was taken). So, if your property goes up in value you may have to pay more back than what you borrowed. 

Or you could pay the loan off through a process called staircasing. This involves paying back in chunks of 10% or more while you still own the house. It’s recommended that you have the property independently valued before taking this approach because you may have to pay admin and legal fees. 

 

Helping you make the most of Help To Buy at Castle Green 

Now that you know more about the Help To Buy scheme, we want you to know that our properties are available to be purchased using equity loans. Our buying process is straightforward, stress-free and we pride ourselves on providing a high level of customer service from start to finish. 

To find out how you can make the most of Help To Buy with Castle Green, get in touch with us today using the contact form or email info@castlegreenhomes.uk.

Sign Up to Our Newsletter