What is a Help to Buy mortgage?

These are mortgages that can be obtained to work with the government Help to Buy scheme, which first launched in April 2013.

The scheme is designed to help people get on the property ladder, and at its heart is a government contribution towards the deposit on a house purchase.

In a nutshell, the Help to Buy scheme allows first-time or, in some cases existing buyers without a large deposit to get onto, or move up, the housing ladder, giving them access to low deposit mortgages with as little as a 5 per cent deposit.

There are three elements of the Help to Buy scheme:

  • Equity loans, where the government lends up to 20% of the purchase price and the rest is paid back to the lender on a repayment basis.This government loan will need to be paid back after 25 years or once the house is sold (if this happens earlier), so if the value of the property has gone up in the meantime, the government will make a profit.
  • Help to Buy mortgage guarantee, in which the government guarantee part of your mortgage, which allows the lender to provide a mortgage with a lower deposit.
  • Help to Buy ISA, where the government can top up your savings by up to £3,000.

Who can apply for a Help to Buy mortgage guarantee, equity loan or ISA?

To be eligible for a Help to Buy mortgage guarantee, equity loan or ISA, you and the house you are looking to buy need to meet several criteria:

Type of property

  • The Help to Buy mortgage guarantee scheme is for residential properties only – not Buy to Let – and will be open until 2021.
  • The savings bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London, and will be paid when you buy your first home.

Deposit

  • Deposits for the Help to Buy mortgage guarantee scheme must be between 5% and 20%, thus a loan-to-value of between 80-95%. For the equity loan, the mortgage must be for at least 25% of the value of the property so the deposit could be higher than 20%.

Government contribution

  • If you’re a first-time buyer and save up to £200 a month with a Help to Buy ISA, the government will boost your savings by 25 per cent, to a maximum bonus of £3,000.
  • There’s no minimum monthly deposit with a Help to Buy ISA – but you can save up to £200 a month (and make an initial deposit of £1,200 when you open the account).
  • The minimum government bonus is £400, meaning you must save a total of at least £1,600.
  • Help to Buy mortgages guarantees are available on repayment mortgages only.

Credit history

  • When evaluating your Help to Buy mortgage guarantee or equity loan application, your lender will usually want to check your credit report information, so it’s worth reviewing this to avoid incurring delays at a later date.