Types of Help to Buy options
Each offering different ways to help secure a home, let’s look in more detail at both schemes.
Help to Buy: Shared Ownership
This option enables you to part-buy and part-rent your property. It’s for potential homeowners who are unable to afford the full mortgage on a home, typically allowing them to buy between 25% and 75% of it and pay rent on the remaining percentage. Though, you can purchase a 10% share on some homes.
Help to Buy: Mortgage Guarantee
This scheme is operating until 30th June 2025, so if you think you’d like to take advantage of it – subject to eligibility criteria – it’s worth looking into sooner rather than later.
It is designed to increase the availability of 95% Loan to Value mortgage products, allowing more households access to mortgages without needing big deposits.
It works by giving lenders the option to buy a guarantee on mortgages if first-time buyers only have a 5% deposit.
Mortgage lenders are compensated if buyers are unable to keep up their repayments and the property is subsequently repossessed. Applicable to 80% of the home’s purchase price, it’s designed to protect lenders from any potential net losses of up to 95%.
Eligibility criteria
To be eligible for the Shared Ownership scheme your household income must be £80,000 a year or less (£90,000 a year or less in London) and you can’t afford all the deposit and mortgage payments for a home that meets your needs.
One of the following criteria must apply too – you:
- are a first-time buyer
- used to own a home but can’t afford to buy one now
- are forming a new household - for example, after a break-up
- are an existing shared owner, and want to move
- own a home and want to move but can’t afford a new home that meets your needs
For the Mortgage Guarantee scheme, to be eligible you must:
- be an individual, not an incorporated company
- be interested in a UK-based property that’s worth £600,000 or less and is a main residential home
- have a deposit between 5% to 9%
- not be buying a new build property
- apply for a repayment mortgage
- pass a lender’s regular mortgage affordability criteria
How the Equity Loan works
The Help to Buy: Equity Loan scheme is now only available in Wales.
The buyer pays a 5% deposit, and the scheme offers an Equity Mortgage for anything up to 20% of the cost of the property. The homebuyer takes out a repayment mortgage for the residual sum.
To qualify, you must:
- be purchasing an eligible home in Wales, that costs £300,000 or less, from a builder registered with the scheme
- be able to fund at least 80% through both a repayment and a minimum deposit of 5%
- attain a first charge repayment mortgage through a qualifying lender
The repayment terms:
- The Equity Mortgage must be repaid within 25 years. Though, you can pay off your Equity Mortgage at any point within that period.
- You can repay either some or all of the total owing under your Equity Mortgage with or without selling your property.
- Should you make a partial repayment, the outstanding balance of your Equity Mortgage must be at least 5% of the market value of your property.
- You can’t make a partial repayment if you’re in arrears with your monthly payments, unless you pay those arrears and any other outstanding fees or expenses off at the same time as making the repayment.
- You must instruct your own Royal Institution of Chartered Surveyors (RICS) valuer to do the valuation.
- If you’d like to change the ownership of your property, you’ll need to complete the Change of Ownership Form from the Welsh government and obtain their permission.
Interest rates and potential fees:
- You won’t pay back any fees within the first five years, following which the interest rate is 1.75% and rises in line with the Retail Price Index +1%.
Other schemes available
There are alternative schemes available throughout the UK. Where you live will determine whether you can apply for them. They include:
- Deposit Unlock scheme, Guarantor Mortgage and Family Assisted Mortgages (UK)
- First Homes scheme, Rent to Buy scheme and Right to Buy / Right to Acquire (England)
- LIFT scheme (Scotland)
- Homebuy scheme (Wales)
