Work out what you can afford to buy in London, Scotland, Wales and the South with our Help to Buy calculator. Learn how to afford your first home with a small deposit and equity loan from the government. Calculate how much Help to Buy equity loan you need to buy a property. Learn more about the Help to Buy schemes, including shared ownership, Help to Buy ISA and Lifetime ISA by exploring our guide.
Your Help to Buy calculation
Mortgage from lender
To get that much mortgage, you'd need a total annual income of about:
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Mortgage lenders usually multiply your salary by a maximum of 5 times to decide how much they will lend you. They will also check your credit file.
Assuming your interest rate stays at % for the full mortgage term of 25 years.
You pay no interest on the equity loan for 5 years. In year 6, the interest rate will be 1.75%. Every year after that, it increases in line with inflation plus 1%.
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These calculations are for guidance only.
See below for how to repay the equity loan.
Help to Buy mortgage schemes are designed to help first-time buyers get onto the property ladder.
The 4 main Help to Buy mortgage schemes are:
A Help to Buy equity loan is a loan from the government towards your deposit on new-build properties. It's interest-free for the first 5 years.
You need at least a 5% deposit to be eligible for the Help to Buy equity loan. The government then loans you a lump sum for the deposit as a percentage of the property value.
How much the government will lend you depends on where the property is:
For example: if you're buying a property in London, the scheme would bump up your 5% deposit to a 45% deposit.
This would give you access to mortgages with a lower loan to value ratio (LTV) and therefore cheaper rates. A bigger deposit also means you need to borrow less money from a mortgage lender.
You can get the equity loan on Help to Buy properties with a maximum value of:
Combining the maximum equity loan percentage with the maximum property value in the different UK locations, the biggest loans you could get are:
On a £400,000 property in London, you’d need to save a minimum £20,000 deposit (5% of the property’s value). You could then get an equity loan of £160,000, making your total deposit £180,000.
This means you'd only need a mortgage for £220,000. Without the loan, you'd need £380,000. Having the loan thus reduces your monthly repayments because you're borrowing less money from the mortgage lender.
While this might sound great, remember - you will need to pay the equity loan back. It is only interest-free for the first 5 years. If you do not sell the property before then, you'll end up repaying your mortgage plus the loan at the same time.
Contact your local Help to Buy agent to find out what Help to Buy properties are available in your area. You can talk to them about getting the equity loan too.
Be sure to apply for a mortgage with a lender that provides Help to Buy mortgages. Some that do include: Halifax; Virgin Money; Barclays; NatWest; Post Office; Santander; Nationwide Building Society; and TSB.
You'll only receive the equity loan (via your conveyancer) once you've exchanged contracts with the seller. Up until that point, the sale is not considered confirmed.
You can apply for the equity loan until March 2021 - the original deadline for the scheme.
Between April 2021 and March 2023, a new, watered-down version of the scheme will be available. It will only be open to first-time buyers in England and introduces regional property price caps.
The Help to Buy regional price caps will be:
You can repay the equity loan at any time without penalty, in chunks of 10% or 20%.
You must repay it fully after 25 years, when you sell the property or when your mortgage term finishes – whatever happens first.
The loan is interest-free for the first 5 years, though you have to pay a £1 management fee every month.
In year 6, the interest on the equity loan will be 1.75%. After that, the rate increases each year by the retail price index (RPI) measure of inflation, plus 1%. This is known as ‘staired’ interest.
The rate of interest on the equity loan is fairly low. But it can add significantly to your monthly mortgage repayments, especially if you borrowed the maximum amount.
For example, on a £400,000 London property, the interest in year 6 alone (on a 40% loan) would be £2,800. And that’s in addition to your mortgage repayments.
The amount needed to fully repay the equity loan is based on the property value when you sell it (not when you bought it).
This means that if property prices have gone up, you must repay more than the original loan amount.
So, if you sold that £400,000 London property for £450,000, and you had taken the full 40% equity loan (£160,000), you would have to repay the government £180,000. That’s £20,000 more than you originally borrowed.
However, if property prices fall and you only managed to sell yours for £380,000, you’d just repay £152,000. £8,000 less than you originally borrowed.
There are regional-specific versions of the Help to Buy equity loan, including:
The Shared Ownership scheme allows you to buy between 25% and 75% of an ex-council or new-build property. You take out a mortgage for the part that you own, and pay rent on the remaining share.
This scheme is sometimes known as ‘part buy part rent’.
On new builds, the share you do not own is owned by the property developer. On ex-council properties, that share is owned by the housing association and in both cases, the property is a leasehold.
Because you're borrowing less money, you need a proportionally smaller deposit to buy a property.
The combined cost of the mortgage and rent payments are usually in line with what you'd pay if you had a mortgage for the whole property.
To qualify for the shared ownership scheme, you must be one of the following:
You could buy a shared ownership property with very little deposit.
For example: a 25% share of a £200,000 property is £50,000. A 5% deposit of £50,000 is £2,500 – so that's the minimum you would need to save. You then need a mortgage lender to loan you £47,500 for the rest of your 25% share.
The housing association or property developer would own the other 75% (£150,000) of the property. That's the part you would pay the subsidised rent on, which is cheaper than the market value and normally around 3%.
To calculate your total monthly payments, you would need to add this rent to your monthly mortgage repayments.
To qualify for the scheme, your total household income cannot be more than £80,000 (or £90,000 in London).
As well as your mortgage and rent, you may need to pay a service charge and/or ground rent. This is because shared ownership properties are primarily leasehold.
Unless you're a first-time buyer purchasing a property valued below £500,000, you will have to pay stamp duty.
You can gradually increase your share in the property by buying it from the housing association (or property developer). This is known as “staircasing”.
The cost of acquiring more equity in the property depends on its current market value, so it could go up or down.
You can eventually own 100% of the property but you might not be able to acquire the freehold. If that’s important to you, be sure to check with the housing association before you buy.
Not every lender offers shared ownership mortgages. Those that do include: Nationwide; Leeds Building Society; Halifax; Kent Reliance; and Barclays.
The Help to Buy ISA is a tax-free savings account aimed at first time buyers saving for a deposit.The government pays a 25% (£50) bonus for every £200 you save into the account and just like every ISA, the interest earned is tax-free.
This scheme was closed to new customers in November 2019.
If you already have a Help to Buy ISA, you can continue to save up to £200 into the account each month until December 2029. The maximum you can save into the scheme is £12,000, so the maximum bonus is £3,000.
The 25% government bonus is only paid if you have saved £1,600 or more and use it for a deposit on your first property by December 2030.
The bonus is paid in one lump sum to your solicitor or conveyancer after you have exchanged contracts.
If you missed the deadline for taking out a Help to Buy ISA, worry not, as you may find a Lifetime ISA(LISA) a suitable alternative.
With a LISA, the government also adds a 25% bonus to your (tax free) savings, provided you use it to buy a first home, or for retirement.
But unlike the Help to Buy ISA, the bonus is paid at the same frequency you contribute to the pot, not just when you withdraw. So, if you pay in monthly, so does the government.
You can save up to £4,000 per year into a LISA, meaning your maximum yearly bonus is £1,000 and the account can remain open for 32 years.
Anyone aged between 18-39 can open a LISA and the money can be used either for a deposit on a first home, or for retirement (when you turn 60). You can contribute to a LISA until the day before you turn 50.
With a LISA, your funds are locked away for the first year. If you try to withdraw earlier, you will not get the 25% bonus and will have to pay a 25% fee instead.
However, on 5 May 2020, the Treasury announced that LISA holders who need to withdraw funds early will be charged 20% until April 2021.
So, if you had £1,000 in your LISA, with the 25% bonus of £250 you would have a total of £1,250. Normally, if you wanted to withdraw your savings you would be charged a 25% penalty - £312.50 – meaning you would receive just £937.50. If you made the withdrawal before April 2021, however, you would be charged 20%, or £250 – meaning you would receive your full £1,000 back.
LISAs can be transferred from one provider to another, allowing you to chase the best rates and you are allowed to contribute to both a LISA and Cash ISA in the same year.
What’s more, if you use your LISA savings to buy a property, you can keep the account open and use it to save for retirement.
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Last updated: 10 August, 2020