By Nicky Burridge

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From how it all works to the types of home it can help you buy, here's what you need to know about Help to Buy.

Not all of us are able to borrow from the bank of mum and dad.

Enter, Help to Buy, which is a way of borrowing money from the government instead.

Help to Buy is designed to help first-time buyers who've managed to save up a small deposit for a first home. 

By taking on a government-backed interest-free loan, that remains interest-free for five years, many first time buyers are able to borrow less with a mortgage and get a better deal.

Since it started in 2013, Help to Buy has helped more than 270,000 people buy a home. The majority of those people were first-time buyers in their twenties and thirties.

Keen to find out more? Sign up via our dedicated Help to Buy page

But first, make sure you’ve covered the basics:

1. What is Help to Buy?

Help to Buy is a government scheme designed to help first-time buyers step onto the property ladder.

It's an equity loan initiative, which means you're borrowing a percentage of the property's value.

Across the UK, you can borrow up to 20% of the home you want to buy's value and in London, you can borrow up to 40%.

Say you want to buy a home worth £250,000. You could use Help to Buy to borrow 20% of that, or £50,000.

However, because it's an equity loan, if the value of your property increases, so does the value of the loan.

So if your property later becomes worth £300,000, you would owe £60,000 on the loan. Equally if it falls to £200,000, you'd owe £40,000 on the loan.

Help to Buy makes it possible to buy a new-build home with a deposit of just 5%.

With a 20% Help to Buy loan and a deposit of 5%, first-buyers are able to get access to 75% mortgages.

These tend to have lower interest rates than 95% mortgages, which means you'll be paying less in interest in the long term.

However, you'll need to bear in mind that you'll also be repaying your Help to Buy loan at the same time too.

2. How much can I spend with Help to Buy?

You can borrow up to 4.5 times your household income with a Help to Buy mortgage.

But Help to Buy has regional price limits to make sure it's available to the people who need it most. 

That means you can’t use it to buy a home costing more than 1.5 times the average price for a first-time buyer pad in your area.. 

The price caps range from £186,100 in the North East to £437,600 in the South East and £600,000 in London.

Regional price caps for Help to Buy

RegionPrice cap for Help to Buy 2021
North east£186,100
North west£224,400
Yorkshire and The Humber£228,100
East Midlands£261,900
West Midlands£255,600
East of England£407,400
South east£437,600
South west£349,000

3. What can I buy using Help to Buy? 

You can only buy a new-build home using Help to Buy. 

And that's good news if you like low maintenance. As any major repairs will be covered for the first 10 years by the builders’ warranty.

With high energy efficiency standards and new appliances, new-builds are also cheap to run.

You have the option to purchase your new-build home before it has even been built.

That means you can get in on a development early and benefit from any house price growth while your home is being built.

Find out more about the benefits of new-builds.

A new build family home in Surrey

4. Am I able to get Help to Buy?

In the past, any buyer could use Help to Buy. But the latest version of the scheme, which launched in April 2021, is only open to first-time buyers.

A first-time buyer is defined as someone who has never owned a property or land in the UK or abroad. 

When you apply for Help to Buy, you'll be asked to confirm via legal paperwork that you're a genuine first-time buyer.

And if you're buying as a couple, you must both meet the definition of a first-time buyer. 

You need to have a high enough income to be able to fund at least 80% of the purchase through a combination of a deposit and a mortgage. 

Want to know how much you can borrow? Check out our mortgage guide.

5. How do I find Help to Buy homes?

Find Help to Buy properties and agents here. 

Once you’ve found a property you want to buy, you must reserve your home. You do this by paying a fee of no more than £500.

After you've reserved your home, you can apply for the equity loan. 

If it turns out you're not eligible for the Help to Buy scheme, the reservation fee will be refunded.

Once your equity loan is approved, you'll receive a letter give you the 'Authority to Proceed'.

This letter is valid for three months and once you have it, you can apply for a repayment mortgage. 

At this point, you can also appoint a property lawyer to help you with your purchase.

Find out more about what a conveyancer does here.

You must exchange contracts within three months of receiving the Authority to Proceed. Then, you must complete within six months of exchanging contracts.

6. What happens when you have to pay the Help to Buy loan back?

Your Help to Buy loan is interest-free for the first five years. You pay a management fee of £1 a month for the life of the loan.

Once the first five years are over, interest is charged at 1.75%. This goes up each year by inflation, which is measured by the Consumer Prices Index plus 2%.

Find out more about what changing bank rates could mean for you.

The loan doesn't have to be repaid until you sell the property, pay off your mortgage or reach the end of your loan term.

You can also start repaying the loan sooner if you want to.

Find out more about what happens when you have to pay your Help to Buy loan back.