Help To Buy Scheme

The Help to Buy scheme offers a loan where the government lends first-time buyers money to buy a newbuild home. In return for the loan the Government will take a mortgage over your home. This mortgage will be based on the percentage of the purchase price you borrow from the Government. When you sell your home, you must repay the same percentage of the sale price as the initial equity loan. This means that if you take out an equity loan for 20% of the purchase price then you must repay 20% of the price at which you sell. There are limits on the scheme:

  • The purchase price must not exceed the maximum set for the area. These vary across the country, ranging from £186,100 to £600,000
  • You must be a first-time buyer
  • You must live in the property
  • The maximum you can borrow is 20% of the purchase price (or 40% in London)
  • Only newbuild properties can be bought
  • You must pay a minimum deposit of 5% from your own money
  • You must take out a mortgage

The Help to Buy loan is interest free for the first 5 years but you are required to pay a £1 monthly management fee by Direct Debit. After the end of the interest free period, and until you repay the loan in full, you will be required to pay:

  • The £1 monthly management fee
  • Monthly interest at the rate of 1.75% of the equity loan

The interest payable will rise each year. The increase will be based by the Consumer Price Index plus 2%. The payments due on the Help to Buy Loan are in addition to the payments you are required to make to your mortgage lender.   Buying with a Help to Buy loan means that there are additional steps involved in conveyancing. It can mean that the process will take longer & will cost more. The process takes time and will require action to be taken by you. It is important, therefore, that you tell your solicitor about your Help to Buy loan as soon as the conveyancing process starts. Because of these complexities and the possibility of mistakes it is very important that you instruct a solicitor who is experienced in dealing with this scheme. More information can be found at: www.helptobuy.gov.uk/equity-loan/equity-loans www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide