Help to Buy Wales

First-time buyers

Help to Buy Wales

By Marie Kemplay

Article 7 of 8

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Help to Buy Wales

If you have a small deposit and are looking to buy a Welsh property, Help to Buy (Wales) could be useful. Learn about how the scheme works in our guide.

Since its launch in January 2014, more than 3,600 people have bought a home using Help to Buy (Wales), according to government figures, with around three quarters of these homes being purchased by first-time buyers.

What is Help to Buy (Wales)?

Help to Buy (Wales) is an equity loan scheme designed to help first-time buyers and existing homeowners in Wales buy new-build properties with deposits of as little as 5%.

To use the scheme, you'll need to be buying a new-build home priced up to £300,000 and have a minimum deposit of 5% saved.

The Welsh government will provide a loan of up to 20% of the property's value, meaning you'll only need to get a mortgage for the remaining 75% (assuming you have a deposit of 5%). This could help you unlock better rates from lenders.

Here's an example of how you could buy a home for £200,000 using Help to Buy (Wales):

  • House price: £200,000
  • Deposit (5%): £10,000
  • Equity loan (20%): £40,000
  • Mortgage (75%): £150,000.

Before taking the plunge, it's useful to know what kind of mortgage options are available to you. For independent, personalised advice, you can call Which? Mortgage Advisers on 0808 252 7987 for a free consultation with impartial experts.

How do I pay back my Help to Buy (Wales) equity loan?

The equity loan provided by the government is interest-free for the first five years. Interest is then charged at 1.75% in year six. After the sixth year, the interest rate will increase in line with the Retail Prices Index, plus 1%. You'll also be charged an administration fee of £1 a month. 

You'll need to pay the equity loan off in full when you sell the property. As the loan is a percentage rather than an amount, you'll need to pay 20% of your sale price, so if the property goes up in value, you could end up paying more back than you borrowed.

Alternatively, you can pay the loan off in chunks of 10% or more while you still own the property – this is known as 'staircasing'. You'll need to have the property independently valued before doing this, and you might also have to pay admin and legal fees.

Are there any restrictions with Help to Buy (Wales)?

  • The scheme can only be used to buy new-build and off-plan properties. Bear in mind that if you buy off-plan, you'll generally need to complete no more than six months after exchanging contracts, but do your research first as some mortgage offers have shorter expiration dates. 
  • You won't be able to let a home bought using Help to Buy (Wales), it has to be your main residence.
  • If you sell the house before paying the loan back, the government will be entitled to a proportional share of its equity. So if you sold the house in the example mentioned earlier for £210,000, having borrowed 20% of the original buying price (£40,000), you'd need to pay the government 20% of the price you sold for (£42,000). 
  • The main difference between Help to Buy (Wales) and its English equivalent is the price limit – you can buy a home priced up to £600,000 in England but only £300,000 in Wales.

Find out more: what is a mortgage? – learn the basics about different types of mortgage with our video guide

Are there any alternatives to Help to Buy (Wales)?

Another option for buyers with small deposits in Wales is the UK-wide Help to Buy mortgage-guarantee scheme, which runs until the end of 2016.

Through this scheme, the government offers mortgage lenders a guarantee on high loan-to-value mortgages, allowing buyers with small deposits to be seen as a less-risky proposition.

  • Last updated: September 2016
  • Updated by: Stephen Maunder