Saving for a large deposit can be a long and tiresome journey, and sometimes, may even seem impossible.
Thanks to the government’s Help to Buy scheme, you can now buy a home with as little as a 5% deposit and have lower mortgage repayments than you would with a standard mortgage arrangement.
The Help to Buy equity loan is a scheme intended by the government to help first time buyers afford to buy new homes in the current economic climate and housing market.
Help to Buy equity loans are only available in England, although similar schemes have been made available by the Scottish Government, the Welsh Government and the Northern Ireland Housing Executive. Equity loans are open to first time buyers who want to buy a new-build property, and who have a 5% deposit available. The government will top up your deposit with an equity loan of up to 20% of the property value – in this case, you would take out a 75% mortgage from a lender to buy the property. For buyers in London only, the maximum equity loan is 40% of the property value. Please see below the maximum property price for each region in England.
| Region | Maximum property price |
| North East | £186,100 |
| North West | £224,400 |
| Yorkshire and the Humber | £228,100 |
| East Midlands | £261,900 |
| West Midlands | £255,600 |
| East of England | £407,400 |
| London | £600,000 |
| South East | £437,000 |
| South West | £349,000 |
If you are interested in the Governments Help to Buy scheme you will need to know a few minimal basics to check if you qualify.
Available to First Time Buyers
The property being purchased must be a new build and priced under the maximum price of the region
You cannot sublet the property
Not own a home or residential land now or in the past in the UK or abroad
Not have had any form of sharia mortgage finance
The scheme is available in England only. Scotland, Wales and Northern Ireland run their own similar schemes
You will need a minimum 5% cash deposit
Although the criteria remains the same for those looking to purchase in London, due to the current property prices in Greater London the upper limit for the equity loan in this area has been increased from 20% to 40%.
This covers the basics but do ensure you get all the required information in relation to how the scheme works before making a commitment.
When looking into your Help to Buy mortgage you will discover that not all lenders participate in the scheme. Those that do will also offer a specific portfolio of rates that will differ to that of their standard mortgages. The good news however, is that typically the rate you will be offered will be priced not solely on the cash deposit you have to put down (usually the minimum 5%) but also inclusive of the equity loan. The lower the loan to value, commonly referred to as LTV, the lower the interest rate and as such help to buy mortgage rates are much more aligned with those who have a 25% deposit to put down.
In general terms the rates offered for help to buy mortgages are priced in the same way as a standard mortgage. You will usually be offered a selection of products with some incurring higher fees than others and some offering benefits such as free property valuation and cashbacks. It is therefore important that you decide upon the best to suit your personal circumstances and loan amount.
Keep reading to find information on the home buying process and for answers to some of your main FAQ’s.
You can also learn about the different types of mortgages and interest rates in our guide.
The Governments Help to Buy scheme could help you purchase your new home as a first time buyer or however, what is the Help to Buy process and where do you start.
Check your eligibility first. The scheme is fairly basic in its criteria but do ensure you meet the minimum requirements first.
If happy you fulfil the basic eligibility you will now need to check on your budget. This will, in the most part, be determined by the amount of mortgage you can obtain albeit there is a maximum purchase price that applies depending on your region of purchase. In addition to checking how much you can borrow from a lender you will also need to have this checked by the help to buy agent for your area.
Finally, once satisfied that the scheme is the right thing for you and the numbers involved are attainable, you can now start to look for your new home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.
The fee is up to 1% but a typical fee is £598.
