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London Help to Buy

Discover how London Help to Buy offers extra help to first-time buyers and home-movers in London.

In this article
Coronavirus (COVID-19) mortgage update What is London Help to Buy? Am I eligible for London Help to Buy?
Applying for London Help to Buy Paying back a London Help to Buy equity loan Alternative options for buying in London

Coronavirus (COVID-19) mortgage update

The government has announced a series of temporary reforms for homeowners, including the ability to apply for a three-month mortgage payment holiday. 

Help to Buy homeowners can also benefit from a payment holiday on interest accrued on their equity loan. More details are available in the government's full guide.

You can find more of the latest updates and advice over on our dedicated Which? coronavirus information hub.

What is London Help to Buy?

Under the government's London Help to Buy scheme, people buying a new-build home in Greater London can apply for an equity loan of up to 40% of the property's value.

London Help to Buy equity loans are available to first-time buyers and existing homeowners looking to buy a new-build property. 

With London Help to Buy, the government will lend you up to 40% of the property’s value (compared with 20% if you were buying outside London). You then need to put down a deposit of at least 5% and get a mortgage to cover the remaining 55% of the property price.

So if you wanted to buy a house for £200,000 with a 5% deposit, you'd need:

  • £10,000 (5%) deposit
  • £80,000 (40%) equity loan
  • £110,000 (55%) mortgage

The benefits of using London Help to Buy

  • You will only need a 5% deposit (as opposed to the 10% usually required by mortgage lenders if you don't have an equity loan)
  • As you're taking out a smaller mortgage, it will be easier for you to prove to lenders that you can afford the monthly mortgage repayments
  • Borrowing a smaller proportion of the property's value from a mortgage lender gives you access to better mortgage rates

Am I eligible for London Help to Buy?

To qualify for London Help to Buy, you need to:

  • Be buying a new-build home worth £600,000 or less
  • Have a deposit of at least 5%
  • Not let out the property or use it as a second/holiday home

Applying for London Help to Buy

To apply for a London Help to Buy equity loan, you will need to purchase a property through a registered Help to Buy house builder. Visit the official London Help to Buy website to find out which developers are currently offering properties.

You'll have to apply directly to the house builder for the loan and then apply for a mortgage separately via your chosen lender or mortgage broker. 

Most big banks and a number of larger building societies are signed up to the scheme.

    Paying back a London Help to Buy equity loan

    When it comes to paying the loan back, London Help to Buy works in the same way as the main English Help to Buy scheme:

    • Loans are interest-free for the first five years.
    • After the first five years, you have to pay a monthly admin fee, which starts at 1.75% of the loan.
    • After year six, the admin fee will go up each year by any increase in the Retail Prices Index plus 1%.
    • The equity loan from the government will not decrease in size (unless you opt to repay part of it early) so, over time, the cost of the admin fee could become quite expensive.

    You will need to repay the equity loan in full after 25 years, when your mortgage term finishes or when you sell your home – whichever happens first. As the loan is for a percentage of your property rather than a set cash value, you'll have to repay the market value of the loan at the time, not the cash amount that you first borrowed.

    You can also choose to repay part of the loan early, in chunks of either 10% or 20% of the total value. This is known as 'staircasing'.

    The way that Help to Buy loans work means that you could end up paying back more or less than the amount you first borrowed, depending on whether your property increases or decreases in value.

    This is how it could work in practice:

    • You take a 40% equity loan to buy a property worth £200,000, so the equity loan value is £80,000.
    • When you come to sell, the property is worth £250,000.
    • You repay £100,000 – this is 40% of the new value of your home, not the amount you borrowed.

    Alternative options for buying in London

    Help to Buy isn't the only scheme in place to help people buy in the capital. 

    Shared ownership is a very popular alternative. With this scheme, you can buy a share of 25%-75% in a property and pay rent on the rest.

    Our guide to buying a home in London explains your other options, including Rent to Buy and expanding your search radius, in more detail.