In this brief guide, we are going to discuss the Help to buy scheme.

The help to buy schemes

The help to buy schemes are a number of first-time buyer schemes which help prospective first-time buyers and home movers get on the property ladder or move homes.

The terms, eligibility requirements and scope of the help to buy schemes differ from one scheme to the other

List of Help to Buy schemes

Help to Buy equity loan

Help to Buy equity loan- Scotland

Armed Forces Help to Buy

London Help to Buy

Help to Buy ISA

Starter homes scheme

Help to Buy shared ownership scheme

Social HomeBuy

Rent to own scheme

We will cover the help to buy schemes in more detail below:

Help to Buy equity loan

The help to buy equity loan is part of the government’s help to buy scheme which requires you to have a minimum of 5% mortgage deposit. The help to buy equity loan will then provide you with 20% of the property price as a loan or up to 40% if you live within London.

The help to buy equity loan is interest-free for the first 5 years after which it is then 1.75% per annum. Every year after the 6th year it increases by RPI +1%.

The maximum house price you can use the help t buy equity loan on is £600,000 in England and £300,000 in Wales.

You can only use the help to buy equity loan on new build properties.

You can repay the help to buy equity loan in full at any time or partially but you must repay at least 10%  of the outstanding loan.

The help to buy equity loan must be paid back when the mortgage term ends or when you sell the home, whichever comes first.

As you pay back the loan you will increase your ownership in your home.

Not all mortgage lenders will allow you to get a mortgage with a help to buy loan but there a few offering this. You can speak to your mortgage broker to get an up to date list of mortgage lenders which offer help to buy mortgages. As of today, mortgage lenders such as Barclays, Nationwide, Natwest and Santander offer a help to buy mortgage.

Help to Buy equity loan -Scotland

There is also the help to buy equity loan scheme in Scotland

Help to Buy equity loan in Scotland started on the 30th of September 2013 and was aimed at first-time buyers or home movers who were looking to buy new build properties in Scotland.

The help to buy equity loan in Scotland no longer accepted any subscriptions from 2015 s it was fully subscribed but it later launched in 2016 under two schemes:

The Affordable New Build scheme, available to larger home builders, and the Smaller Developers New Build scheme, for smaller home builders.

The help to buy equity loan scheme in Scotland works just like the help to buy equity loan scheme in England. The Scottish government will lend up to 15% of the property price and can only be used on properties which are no more than  £200,000.

Armed Forces Help to Buy

What is the forces help to Buy?

For those serving in the armed forces. A special scheme is in place to offer reduced initial costs. The scheme offers armed services personnel to borrow up to 50% of their salary at no cost. This is available for first-time buyers and home movers. The maximum loan is £25,000.

Am I eligible for the forces help to buy? 

You need to:

  • have completed a minimum length of service
  • have more than six months left to serve when applying
  • meet the right medical categories

In some cases, the scheme can still be qualified for without meeting the above criteria. E.g medical situations.

London Help to Buy

The London help to buy scheme is just like the help to buy equity loan scheme, the only difference is that the London help to buy will offer the borrower up to 40% of the property price as an equity loan.

Help to Buy ISA

The help to buy ISA is a government scheme which helped first-time buyers to get on the property ladder by increasing how much they could save. The scheme allowed you to earn up to £3,000 as a government bonus. To earn this you would need to save at least £12,000 with the help to buy ISA.

Any money earned with the help to buy ISA is tax-free. You can use the help to buy ISA to buy properties worth up to £250,000 outside London and £450,000 London.

You can use the help to buy ISA toll 2030.

You don’t have to use the help to buy ISA for new builds, you can use it for older properties too.

The help to buy ISA scheme will stop accepting applicants in December 2019

Starter homes scheme

The starter home scheme is a help to buy scheme which is designed for first-time buyers and home movers under the age of 40 to purchase new build homes.

How does the starter home scheme work?

The starter homes are sold to borrowers for 80% of their current value with a maximum price of £450,000 in all London boroughs and £250,000 outside London.

How do I apply for the starter home scheme?🔥

Properties are not always available for this scheme so you will need to register your interest here to make sure you get updates on when properties become available.

Once you purchase the property via the starter home scheme you will not be able to sell or let it in the open market for at least 5 years. This is of course put in place to discourage investors from exploiting this discount. In any case, an application for a starter home mortgage scheme does not guarantee your acceptance.

Help to Buy shared ownership scheme

The help to buy shared ownership scheme is a scheme which allows first-time buyers or those who have previously owned properties but don’t currently own any property to buy a share of a property which has to be a minimum of 25%. You will then need to pay a subsidized rent on the remaining share of the property which you don’t own.

You will need to earn a maximum of £80,000 outside London and £90,000 within London.

You will also need to have at least a 5% deposit for the total share of the property which you are buying. You will need to have funds to cover other costs such as moving costs, conveyancer fees and stamp duty costs.

You will also need to have a mortgage lender who is willing to lend on a shared ownership property.

There are various methods to apply for the shared ownership scheme but this is dependant on where you live. 

You can then go on to increase your ownership by buying more shares in the property.

Social HomeBuy

The social home buy scheme is a help to buy scheme.

To be eligible for the social HomeBuy scheme you would need to have lived in a social housing property for 5 years minimum after which you would be able to own a share of the property and pay subsidized rent on the other share.

Who qualifies for the social Homebuy scheme?❄

Those who have lived in social housing for at least five years and your landlord must be a member of the Social HomeBuy scheme.

What is the Discount available with the social home buy scheme?☀

You’ll get a discount of between £9,000 and £16,000 on the value of your home, depending on where your home is and the size of the share you’re buying. You buy a minimum 25% share of your property. You then pay a subsidized rent on the rest. When you can afford to, you can increase the share of equity that you own. The property price will always be assessed at the time you want to purchase more shares of the property.

For example, if the full discount is £16,000, you can expect to receive the following discounts if you buy a share:

· 25% – £4,000

· 50% – £8,000

· 75% – £12,000

Social HomeBuy scheme Property eligibility?

The property must be owned by the council or housing association.

Conditions of the social HomeBuy scheme🔥

There are some conditions that you must stick to after buying a property through the social HomeBuy scheme.

You are not allowed to sublet the property within the first five years of buying.

If you sell your home within the initial five years of buying, then the discount you received will be repayable. The discount is repayable if the home or shares assigned to you are sold within five years of their purchase.

The amount due to be repaid is calculated as a percentage of the resale value equivalent to the percentage of the discount when compared to the purchase price and reduced by a fifth each year as follows:

· Sale within one year, repay an amount equal to the percentage that the discount bore to the purchase price.

· Sale within two years, repay 80% of the amount calculated as above.

· Sale within year three, repay 60% of the amount calculated as above.

· Sale within year four, repay 40% as calculated above.

· Sale within year five, repay 20% of the amount calculated above.

· No repayment required after year five.

How to apply for the social HomeBuy scheme?✔

Some housing associations and councils have not joined the schemes. Aside from this, you should be able to apply for the scheme via your council or housing association. Make sure to confirm if your council or housing association is part of the scheme first.

Rent to own scheme

“This is a new scheme for people living in Wales who want to own a property but don’t have enough money for a deposit. The idea is the new scheme allows buyers in Wales to rent a home they can later purchase, with the rent subsidising a future mortgage deposit.

  • Who can do it? Non-homeowners, with a combined household income of £60,000 or less and who are not eligible for housing benefit.
    Property type: New-build properties available under the scheme.
    How to apply: Read the Rent to Own – Wales Buyers Guide for full details about the scheme and to see if you’re eligible. If you think you are, you can contact landlords participating in the scheme to find out about available properties. If you find a property you want to reserve, you’ll need to pay a holding fee of £250 and complete the Rent to Own – Wales application form.”

FAQs about the Help to Buy schemes

Who is eligible for help to buy?

The help to buy schemes all have different eligibility requirements but typically you will have to:

Be a UK resident
Be  a crown servant or the spouse of a crown servant who is serving overseas
Be at least 18 years of age
Be a first-time buyer or home move

Is help to buy ending?

No, the help to buy scheme in itself isn’t ending but some of the schemes within the help to buy programme will end soon. The help to buy ISA will stop accepting applications in December 2019. The current help to buy equity loan scheme will end in 2023.

Is help to buy only for new builds?

Yes, most help to buy schemes will only let you use the scheme on a new build property. This was made this way to encourage property developers to continue building more homes and hence increase the supply of homes in the UK. If you don’t know, the UK is suffering from a shortage of affordable housing. Help to buy was meant to solve this but most homes which have been built as a result of the help to buy scheme won’t be classed as “affordable”.

How does help to buy scheme work?

The help to buy scheme works differently as there are various help to buy schemes.

Will I be eligible for help to buy?

To check if you are eligible for the help to buy scheme you should check the eligibility requirements of the help to buy scheme you are interested in.

Can you sell your house on help to buy scheme?

Yes, you can usually sell your house if you have bought it with the help to buy scheme but based on the help to buy

In this brief guide, we discussed the help to buy scheme and all its benefits. If you have any questions or comments please let us know.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.