Help to Buy scheme: everything you need to know

Help to Buy is a government scheme that gives buyers a government loan to boost their deposit and buy their first home.

While the scheme is now closed in most of the UK, you can still apply for Help to Buy in Wales.

Help to Buy is an equity loan initiative, which means you borrow a percentage of the property's value.

First time buyers can borrow up to 20% of the property value, providing the home is under £300,000 in Wales.

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 time 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.

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

However, to use Help to Buy in Wales, the home you're planning to buy must cost less than £300,000.

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

And that's good news if you like low maintenance. 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.

9 ways a new-build home can save you money

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.

Guide to buying a new-build home

If you're buying a home in England, Scotland or Northern Ireland, you can no longer apply for Help to Buy.

In Wales, to be eligible for the scheme you must be:

• a first time buyer

• able to fund up to 80% of your property through a combination of a mortgage and a minimum cash deposit of 5%

• Buying a home that costs less than £300,000

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.

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We're only talking about how to apply in Wales in this section, as it's the only part of the UK where you can start a new application.

1. Find a Help to Buy home

First up, find a home for sale under the Help to Buy - Wales scheme.

Search Help to Buy homes in Wales

When you find one you love, you'll pay a reservation fee of no more than £500.

The £500 reservation fee is fully refundable if you’re not eligible for the loan.

2. Apply for the loan

You can then apply for the equity loan on Gov.Wales.

You'll need to include a copy of the home builder’s signed reservation form, as well as personal and financial information.

Apply for Help to Buy - Wales

Help to Buy - Wales will check your eligibility, monthly income and outgoings.

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

The letter is valid for 3 months and once you have it, you can apply for a repayment mortgage.

3. Apply for a repayment mortgage

You're responsible for arranging your repayment mortgage and it has to be less than 4.5 times your gross annual income.

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

What does a conveyancer do?

You must exchange contracts within 3 months of receiving the Authority to Proceed.

Then, you must complete within 6 months of exchanging contracts.

The schemes worked in a similar way in England, Scotland and Northern Ireland when they were open.

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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%.

You have 25 years to repay the equity loan, unless you sell the property or repay your mortgage before then, in which case you will need to repay it at that point.

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

What happens when you have to pay your Help to Buy loan back?

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.

There are other schemes to help first-time buyers step onto the property ladder.

• Own New Rate Reducer allows you to buy a new-build home with a low interest mortgage rate

• The Mortgage Guarantee Scheme enables you to take out a 95% mortgage and is open to new applications until 31 December, 2023.

• Deposit Unlock lets you buy a new-build home with just a 5% deposit, plus you'll get a competitive mortgage rate.

• Shared Ownership enables first timer buyers to purchase a share of a property and pay rent on the rest.

• The First Homes scheme enables local first-time buyers and key workers to purchase a home at a 30% to 50% discount.