Do I need 'help to buy' mortgage advice?

If you are struggling to buy a home, there are various forms of help available.

These include equity loans, which enable you to have a smaller deposit and mortgage, special savings products to help you raise a deposit (the lifetime ISA, which replaced the help to buy ISA as this closed for new applicants in November 2019), and shared ownership schemes.

Though largely aimed at first-time buyers, some schemes are open to existing homeowners.

Please note that a shared ownership scheme can’t be used in conjunction with a help to buy equity loan, but either can be used together with a lifetime ISA.

Find out more about each kind of scheme here.

What is the help to buy scheme?

The government decommissioned the help to buy scheme in England since March 2023, which helped people buy new-build homes (similar schemes were available in Wales, Scotland, and Northern Ireland until recently).

It worked by offering an ‘equity loan’ covering up to 20% of the home’s purchase price. This meant that your deposit could be as little as 5%, with a 75% mortgage to cover the rest, increasing your chances of securing a mortgage deal, and being able to afford the repayments.

The loan was always the same percentage of the property’s price, so it would increase if your home increased in value.

So, if you took out a 20% equity loan on a £250,000 property (worth £50,000) and the home later sold for £270,000, you’d have had to repay £54,000. If the value of your home fell, you would repay less.

While the government’s help to buy scheme was a prime example of available assistance for home purchasers, you can no longer apply for help to buy equity loans in England, although equity loans are still available in Wales until March 2025.

Fees and interest

If you took out a help to buy equity loan before applications closed, there is virtually no interest to pay on your equity loan for the first five years of ownership, except a nominal management fee of £1 per month.

From year 6 onwards, however, you have to pay interest on the loan (as well as the management fee) at a rate of 1.75% initially, rising with the Retail Price Index (RPI) plus 1%.

So if the RPI is 5% in year 6, your interest rate would increase by a factor of 6%in year 7, to become 1.86% (because 1.75 multiplied by 1.06 is 1.855, which is then rounded up).

This means for an equity loan of £50,000, your interest repayment in year six would be £875. Adding the management fee, this comes to £887 (or just under £74 per month).

This isn’t a huge sum, but it is worth bearing in mind – it will increase every year, and unlike your mortgage repayments, the money isn’t going towards your investment.

This rule is designed to encourage people either to buy more equity in their home or sell it and move into full ownership after a few years.

Buying more equity (‘staircasing’)

You can repay all or part of your equity loan at any time, by buying more equity (in 10 per cent minimum chunks) at the property’s current market value.

You could do this using lump sums or by remortgaging to a bigger mortgage if you can. Owning more equity will reduce the size of your interest repayments on your equity loan.

London Help-to-Buy

There is a special form of the Help-to-Buy scheme in London. This offers double the size of equity loan, covering up to 40% of the total purchase price.

Bear in mind however that a larger equity loan will mean a smaller share of any increase in the property price, as well as larger interest repayments.

Am I eligible for Help-to-buy?

You can no longer apply for the help to buy scheme, whether you are a first-time buyer or an existing homeowner.

You also cannot rent out a property bought through the help to buy scheme.

Not all mortgage providers will offer mortgages for help to buy arrangements, so contact a mortgage broker to find the best one for you.

Learn more: how to remortgage on help to buy

What is the help to buy ISA and lifetime ISA?

There are ISAs available that are specially designed to help you save up a deposit for your first home.

Previously, there were two kinds available: the help to buy ISA and the lifetime ISA, although the latter has now replaced the former.

The help to buy ISA allowed you to save up to £12,000 and provided a bonus of 25% (bringing the total up to £15,000) when you completed the purchase of your first home. However, this ISA scheme is no longer available to applications.

A lifetime ISA offers a similar 25% bonus when you use it to buy your first home, but you can save up much more in it (up to £4,000 per year, for a maximum bonus of £32,000). You must be aged under 40 (and over 18) to open one.

Find out more about these ISAs.

What is shared ownership?

Another way to buy a home affordably may be through shared ownership.

Instead of taking out an equity loan, you buy a percentage of the property with a mortgage and deposit and pay rent on the remainder.

You then have the option of increasing your share later (‘staircasing’) by buying more of the property, until you own it outright.

Find out more about shared ownership.

The bank of Mum and Dad

If you don’t want to use one of these help-to-buy schemes, remember that there are several options available for buying a home with help from your family.

Which options are right for me?

A mortgage broker or financial adviser can help you decide whether to opt for a Help-to-Buy ISA or a Lifetime ISA, and whether to apply for an equity loan or shared ownership, or neither of these.

Get expert financial advice

While the government is no longer accepting applications for help to buy equity loans and ISAs, options like the lifetime ISA are still available to provide assistance should you be looking to purchase your first home. 

Unbiased can match you with an expert financial adviser or mortgage broker who can walk you through the assistance options available to you and help you make the right choice for your future as a homeowner.

Did you find this article helpful? Then you might find our article on the government First Homes Scheme, information too!