Help to Buy explained What is Help to Buy?

Understand the basics of Help to Buy in our two-minute video, then find out more below.

 

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Video transcript

If you've been struggling to save up a big enough deposit to get a mortgage, the government's Help to Buy Scheme could be the thing for you. But what is it? And how exactly does it work? Keep watching to find out. There are two parts to Help to Buy's game and both are available to anybody looking to buy a new house.

As long as you have a deposit of at least 5% and I look in to buy a house to live in that's worth 600, 000 pounds or less, I hope to buy equity loan is available if you want to buy anew built property the government will lend you up to 20% of the property's value, you put down a deposit of 5% and then borrow the rest.

The equity loan is interest free and fee free for the first five years, but after that you will have to pay a monthly administration charge, you'll need to repay the equity loan in full of the 25 years when your mortgage turn finishes or when you sell you home. Whichever happens first, how much you have to repay depends on how much your property is worth at the time, rather than repaying the actual amount you borrowed plus interest, as you would on a normal loan, you would always repay the same percentage you borrowed.

If the value of your house is gone up, you'll pay back more than yo borrowed, but if the value of your property is going down, you'll end up paying back less than you took out in the first place of you're not looking specifically for a new built property, the Help to buy mortgage guarantee will make it easy for you to get a mortgage.

This parts of the scheme is a deal between the lender and the government loan, so it doesn't impact on you directly. All of the work goes on behind the scenes with the government backing your deposits making the lender feel more secure about giving you the money. Some lenders are specifically advertising helped by mortgages for people with deposits between 5% and 20%, but we found that there are plenty of mortgages not backed by the scheme offering similar rates. So shopping around is the key to getting the best deal.

If you are interested in Help to Buy speak to a mortgage adviser about whether or not it's the best option for you, and whether there's a better solution out there. Our independent mortgage advisers show thousands deals to find the right one for you, and you can also use Witchers mortgage comparison tables to help you find the very best deal.

What is Help to Buy?

The Help to Buy scheme is designed to help people get on the property ladder or buy a new home without a large deposit. This government scheme has four parts: Help to Buy mortgage guarantees, Help to Buy equity loans, London Help to Buy and Help to Buy Isas. 

In this guide, we give an overview of how each part of the Help to Buy scheme works. You can visit our dedicated pages on each part of the Help to Buy scheme for more detailed information.

  • If you're hoping to get a mortgage using a Help to Buy scheme, we'd recommend talking to an impartial, whole-of-market broker. Which? Mortgage Advisers are independent experts who can help you find the right mortgage for your personal circumstances. You can call for a free initial consultation on 0808 252 7987.

Help to Buy scheme: do I qualify?

To be eligible for Help to Buy, you must:

  • Have a deposit of at least 5%;
  • Be looking to buy a home worth £600,000 or less (different limits apply for Help to Buy Isas);
  • Be purchasing a property you intend to live in most of the time (ie not a property you intend to let out or use as a second home).

Help to Buy mortgage guarantee

Help to Buy mortgage guarantees can help home buyers unlock better mortgage rates. Most of the UK's biggest mortgage lenders have signed up to offer the guarantees, as well as smaller lenders.

The Help to Buy mortgage guarantee works like this:

  • You put down a deposit of between 5% and 20%, and borrow the remainder from a mortgage lender
  • The government will guarantee any mortgage borrowing above 80% of the property's value - for example, if you took out a 95% mortgage the government would guarantee to repay your lender up to 15% of its value if you defaulted
  • The property can be old or new-build
  • You don't have to be a first-time buyer to qualify

Find out more: Help to Buy mortgage guarantee guide

Help to Buy equity loan

Help to Buy equity loans are among the most popular routes into home ownership, and are only available to people who want to buy a new-build property

Help to Buy equity loans work like this:

  • You put down a deposit of at least 5%
  • The government lends you up to 20% of the property's value as an equity loan
  • You take out a mortgage on the rest of the property's value (so, if your deposit was 5% and your equity loan was 20%, you'd then take out a 75% mortgage)

Find out more: if you live in England, read our Help to Buy equity loan guide; alternatively check out Help to Buy (Wales) or Help to Buy (Scotland) (the latter is currently closed for applications but we'll update the page when the Scottish government announces its plans for the replacement scheme). Residents of Northern Ireland aren't eligible for Help to Buy equity loans.

London Help to Buy

This works in the same way as Help to Buy equity loans, but buyers in London can borrow 40% of the property price from the government rather than 20%.

Find out more: London Help to Buy guide

Help to Buy Isa

Help to Buy Isas are a type of tax-free savings account aimed specifically at people saving to buy their first home.

For every £200 contributed, the government will add an extra £50 towards buying your first home, up to a maximum of £3,000. This is paid to your solicitor when you're ready to move.

You can use Help to Buy Isa savings to purchase a home worth up to £250,000, or £450,000 if you're buying in London.

Find out more: Help to Buy Isa guide

Forces Help to Buy

If you're serving in the armed forces, Forces Help to Buy is a special part of the Help to Buy scheme which could help you to buy a property. 

Through the scheme, servicemen and servicewomen can borrow up to 50% of their salary interest-free to use for a deposit and other buying costs such as legal fees. 

The maximum loan you can get is £25,000, which you'd repay over 10 years. 

To be eligible you must:

  • have completed a minimum length of service
  • have more than six months left to serve when you apply
  • meet certain medical categories

To apply you will need to go through the Joint Personnel Administration system. Talk to your chain of command or personnel agency for more information.

  • Last Updated: August 2016
  • Updated by: Marie Kemplay

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