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. 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:
£NaN - £NaN
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 1.9% 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 specific Help to Buy 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 loans you depends on where the property is:
For example: if you are buying a property in London, you could bump up your 5% depost to a 45% deposit. This would give you access to mortgages with lower loan to value (LTV) and therefore better rates.
A bigger deposit means you can 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. But without the loan, you'd need £380,000. Having the loan reduces your monthly repayments because you're borrowing less money from the mortgage lender.
All this might sound great, but remember, you need to pay the 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 is available. It will only be open to first time buyers and includes new regional property price caps.
The Help to Buy regional price caps are:
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 only 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).
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 lets you purchase between 25% and 75% of a property. Shared ownership houses are usually ex-council or new-builds.
You need a mortgage for the share of the property that you own, and pay rent on the remaining share. This scheme is sometimes known as part buy part rent.
Not every lender offers shared ownership mortgages. Those that do include: Nationwide; Leeds Building Society; Halifax; Kent Reliance; and Barclays.
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.
Only first time buyers can get a Help to Buy ISA, so you may hear it referred to as a first time buyer ISA.
When you buy your first home worth up to £250,000 (or £450,000 in London), the government pays out a 25% bonus.
To receive the maximum £3,000 bonus, you would need to contribute £12,000 into your Help to Buy ISA.
The Help to Buy ISA can be used on any property.
A Lifetime ISA (LISA) works in a similar way the Help to Buy ISA.
It allows tax-free savings and gets you a 25% bonus from the government. The government pays in the bonus at the same frequency that you contribute. So, if you pay in monthly, so does the government.
You can earn a maximum £1,000 bonus per year with the LISA for up to 32 years.
Edited by: Sarah Guershon. Help to Buy calculator updated to version 2.0 on 21 August 2019.
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Last updated: 22 August, 2019
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