All You Need to Know About Help to Buy


All You Need to Know About Help to Buy

When looking at the current state of the economy and the housing market, it’s clear that it’s becoming more and more challenging to purchase a property in the UK. Thankfully, the UK government has a few options for those unable to buy the right home for their needs on the open house market – Shared Ownership and Help to Buy. With the Help to Buy Scheme coming to an end in England soon, the final application deadline is 31st October 2022 – Help to Buy (Scotland) Affordable New Build scheme is now closed, Phase 3 of Help to Buy in Wales will be available until March 2023. Full guidance on each of these schemes can be found here: Help to Buy: Equity Loan.

This situation urges those wanting to take advantage of the scheme to decide between the two schemes and take action before it’s too late. 

While both of those schemes can be great in assisting you in purchasing your first home, it is essential to note that they are vastly different and should be explored in detail before you choose which one to go for. In this blog post, we will discuss the Help to Buy scheme, eligibility and other points to consider, ensuring that you are well informed when making your decision.

Help to Buy – How does it work?

The Help to Buy Equity Loan is a government loan scheme designed to help first-time buyers in England buy their property of choice for an affordable price. When a buyer chooses to go with a Help to Buy scheme, they agree to enter a standard mortgage agreement on a home with a lower deposit, with an equity loan provided by the government, which leaves them with a duty to pay off that equity loan while also paying their mortgage.

While the size of this loan can vary per location, the maximum amount offered cannot exceed 20% (or 40% in London). In addition, the Help to Buy 2021 changes introduced regional price caps, limiting the cost of the property that can be bought, depending on the area, with the lowest price cap being in the Northeast of England (£186,000) and the highest price cap being in London, standing at £600,000.

When it comes to your equity loan as a Help to Buy buyer, you will be thrilled to know that the first five years of your loan are interest-free, allowing you to focus on your mortgage and pay your equity loan on your terms.

From the sixth year, you’ll be charged interest monthly at a rate of 1.75% on 10% of the original property purchase price. The interest rate will increase every year in April, by adding the Consumer Price Index (CPI) plus 2%.  If the rate of inflation is at 0% or less, the interest rate will rise by 2%.

For full information on paying back an equity loan with the Help To Buy scheme, you can read the guidance here:

Help to Buy – Am I eligible?

As the purpose of this scheme is to make housing more affordable, the requirements are simple – to qualify, you must be:

  • 18 or over
  • A first-time buyer
  • Able to afford the fees and interest payments (including the initial deposit of 5% – 20% of the property price)

In addition to buyer requirements, the scheme also has specific requirements for the property in question. For the property to qualify for the scheme, it must be:

  • A new build
  • Sold by a Help to Buy registered homebuilder
  • The only home you own and live in

Help to Buy – Things to consider

Once you have established that a sale is taking place and have chosen your solicitor/conveyancer, they will sit with you to go through the draft contract and any

While Help to Buy is a great scheme designed to help people find their homes at a reasonable price, it doesn’t come without its pros and cons.

As far as advantages go, when you choose the scheme, you benefit from:

  • A low initial deposit (as low as 5%)
  • Access to lower mortgage rates
  • Flexibility in equity loan payments (due to five years interest-free)
  • The chance to access newly build properties at an affordable price

When it comes to problems with the scheme, the disadvantages you should take into consideration are:

  • The amount of equity you repay will continue to rise as your property increases in value.
  • Equity loan rates can quickly add up after the fifth year if not repaid in advance.
  • Not all lenders offer help to buy mortgages.
  • Re-mortgaging can be difficult due to low availability and preference for buyers who have repaid their equity loans.
  • Property owners need permission for alterations to the property (especially structure changes which raise the property’s value).

Now that you’ve read our quick introduction to the Help to Buy scheme take a look at our post summarising shared ownership schemes so you can be sure you’re well acquainted with both before you make your decision!

supporting documents and read/complete the TA6 form, which describes the condition of the property at the point of purchase.

Before you sign your contract, your solicitor will need to ensure that:

  • All enquiries have been returned and are satisfactory.
  • Fixtures and fittings included in the purchase are what you expected.
  • A completion date has been agreed upon between both parties, typically one to four weeks after the exchange of the contracts.
  • The buyer has transferred their deposit into their solicitor’s account, ready for the exchange.

If you have any concerns about the sale or the contract, this is the perfect time to address them. At this stage of the sale, you are still able to withdraw from the purchase without being financially liable.

Help to Buy Conveyancing

Whilst a lot of the conveyancing processes for buying a property will remain the same when buying a property with Help to Buy, the Help to Buy conveyancing process is more complex than standard conveyancing because of the additional contract you have with the Government, which is providing an Equity Loan. Our specialist property team can provide you with the highest quality of guidance and handle all aspects of your transaction on your behalf.

Feel ready to make your decision or need advice regarding a property purchase? Get in touch now!