Help to Buy schemes

Longing to take that first step – or next move – on the property ladder? If you can’t afford a hefty deposit, using one of the government’s home buying schemes may be a good option.

These schemes can help you buy a place with as little as a 5% deposit. There are four main schemes:

• Mortgage guarantee scheme - where the government offers guarantees to lenders so they can offer 95% mortgages to people with 5% deposits. This scheme runs to the end of December 2023.
• Help to Buy shared ownership - where you buy a share of your home (between 10% and 75%) and pay rent on the rest.
• Lifetime ISA - where the government can boost your savings by up to £1,000 a year. You must be under 40 to open one.
• Help to Buy ISA - where the government can top up your savings by up to £3,000 when you buy a new home. This type of ISA is now closed to new applicants.

Mortgage guarantee scheme

The mortgage guarantee scheme was launched in April 2021 to help people with a small deposit get a mortgage. The government encourages lenders to offer 95% mortgages by guaranteeing it will compensate them if the borrower can’t keep up their repayments.

To take part in the scheme you must:

• Have a deposit of at least 5% of the price of the property you want to buy.
• Pass the usual affordability checks.
• Buy a home which costs no more than £600,000.

The scheme is open to first-time buyers as well as people looking to move home. It will run until 31 December 2023 and is available throughout the UK.

Shared ownership

The shared ownership scheme lets you buy a share of a home (between 10% and 75%) and pay rent on the rest. You pay for your share using your savings and/or a mortgage. You’ll typically need a deposit of between 5% to 10% of the share you’re buying.

Shared ownership isn’t just aimed at first-time buyers. It’s also open to those who previously owned a home, but can’t afford to buy one now, and existing shared owners who want to move home.

• You’re eligible to buy a home through shared ownership if your household income is £80,000 a year or less (£90,000 a year or less if you live in London).
• Shared ownership properties are always leasehold.
• You have the option to buy more of your home at any point once you own your initial share.
• If your home is part-owned by a housing association and you decide to sell, the housing association is given ‘first refusal’ to buy your share. It also has the right to find a buyer for your home. If you own 100% of your home then you can sell it on the market, such as through an estate agent.
• As well as finding a deposit and all the regular costs associated with home ownership, bear in mind that with shared ownership you’re also responsible for service charges (if in a block of flats) and regular rental payments.
• If you’re aged 55 or over you can buy up to 75% of your home through the Older People’s Shared Ownership (OPSO) scheme and you won’t have to pay rent on the rest.
• There are different rules on shared ownership in Wales, Scotland and Northern Ireland.

Lifetime ISA

This isn’t a Help to Buy scheme, but it’s still a government scheme that can help you buy your first home.

• You can use it to buy your first home or save for your retirement.
• You must be between 18 and 40 to open a Lifetime ISA, but you can save in it until you’re 50.
• You can put up to £4,000 in each year, and the government will add a bonus of 25% -- up to a maximum of £1,000 a year.
• If you withdraw your money and don’t use it to buy a home or to help fund your retirement you will lose the bonus.
• If you have both a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one for a house deposit. But speak to your bank or building society if this is a problem, as you may be able to transfer the balance from your Help to Buy ISA to your Lifetime ISA.

You can use your Lifetime ISA to buy a home as long as all the following apply:

• The property costs no more than £450,000
• You buy the property at least 12 months after making your first payment into the Lifetime ISA.
• You use a conveyancer or a solicitor for the purchase as the ISA provider will pay the funds directly to them.
• You buy the property with a mortgage.

Help to Buy ISA

A Help to Buy ISA is a tax-free savings account you can use to save for your first home. If you save a certain amount the government will top up your savings with a bonus.

Please note Help to Buy ISAs are no longer available to new savers. Existing savers can pay into their Help to Buy ISA until November 2029 and can claim their 25% bonus until November 2030.

How these ISAs work:

• You can save up to £200 a month in your ISA and the government will boost your savings by 25%. That’s a £50 bonus for every £200 you save.
• The maximum bonus you can get is £3,000. So, if you save £12,000, the Government will boost your total savings to £15,000.
• You can only have one Help to Buy ISA but if you’re buying with someone, you can both have accounts and receive bonuses.
• You can only access your bonus after you’ve exchanged on a home. Your solicitor will claim the bonus for you.

To get the bonus on your Help to Buy ISA you must:

• Be a first-time buyer.
• Buy a property in the UK.
• Be buying a home for no more than £450,000 in London, and up to £250,000 in the rest of the UK.

Find the right mortgage

With a variety of first-time buyer and home owner mortgages available, make sure you read up on mortgages and compare deals carefully to find one that’s right for you.

You can compare mortgages from trusted providers across the UK with Experian. It’s free and won’t affect your credit score. And because we’ve got the data that matters, we can show you which lenders are most likely to accept you.

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