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The help to buy scheme was introduced in 2019. The purpose of the scheme is to help first time buyers with a government funded loan of up to 20% of the property value. The scheme changed to the first-time buyer's equity loan scheme in 2021 and lasts until October 2022.
Below is the important information first time buyers looking to access the scheme will need. You can download the full document here.
It must not have been lived in by anyone before you buy it.
There’s also a ‘maximum property purchase price’ limit for the home you buy depending on which region it’s in. You can buy a home up to and including the maximum property purchase price limit.
| Region | Maximum property purchase price |
|---|---|
| North East | £186,100 |
| North West | £224,400 |
| Yorkshire and the Humber | £228,100 |
| East Midlands | £261,900 |
| West Midlands | £255,600 |
| East of England | £407,400 |
| London | £600,000 |
| South East | £437,600 |
| South West | £349,000 |
You’ll need to:
You can then borrow an equity loan to cover from 5% and up to 20% of the property purchase price of your newly built home. If the property is in London, you can borrow up to 40%.
The equity loan percentage you borrow is used to calculate your interest and equity loan repayments.
Example
| Property purchase price | Equity loan percentage | Equity loan amount borrowed |
|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 |
The equity loan percentage used to calculate your interest and repayments is 20%.
You do not have to pay interest for the first 5 years. In the sixth year, you’ll be charged interest at a rate of 1.75%. This will be applied to the equity loan amount you originally borrowed (the equity loan percentage of the property purchase price). This annual interest is spread over the year in monthly payments.
Example
| Property purchase price | Equity loan percentage | Equity loan | Annual interest payment in year 6 (1.75% of the equity loan) | Monthly interest payment in year 6 |
|---|---|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 | £700 | £58.33 |
The interest rate increases every year in April, by adding the Consumer Price Index (CPI) plus 2%.
Your interest payments will decrease if you make a part repayment of the equity loan. This is because the amount the interest rate is applied to will reduce.
You’ll need to pay a monthly management fee of £1 when you take out the equity loan until you pay it off.
If you change your equity loan, including if you remortgage or make an equity loan repayment, you’ll need to pay administration fees.
You’ll also have to pay other fees associated with buying and owning a home, for example, legal and mortgage arrangement fees and for market value reports.
Paying interest and fees does not count towards paying back the equity loan. If you do not keep up with payments, you may need to pay recovery costs or interest on the amount you owe.
You can pay back part or all of your equity loan at any time.
Repayments are based on your equity loan percentage and the market value of your home at the time you want to make a repayment.
You’ll need to get a market valuation report from a chartered surveyor when you make a repayment.
Read more detailed guidance on repaying your equity loan.
The smallest repayment you can make is 10% of the market value of your home.
Paying back part of your equity loan will reduce the monthly interest payments you’ll need to pay from the sixth year of taking out the equity loan.
Example
| Market value of your home | Equity loan percentage | Amount |
|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 |
| Value at time of repayment £220,000 | Paying back 10% | £22,000 |
Your remaining equity loan is 10% of the market value of your home.
From the sixth year, you’ll be charged interest monthly at a rate of 1.75% on 10% of the original property purchase price. The interest rate will increase every year in April, by adding the Consumer Price Index (CPI) plus 2%.
You must repay all your equity loan when you:
You may also be asked to repay the equity loan in full if you do not keep to the terms and conditions.
If you sell your home, you’ll pay the equity loan percentage of the market value or agreed sale price if it’s higher.
Example
| Market value of your home | Equity loan percentage | Amount |
|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 |
| Value at time of full repayment £250,000 | Paying back 20% | £50,000 |
If you want to pay off your equity loan and you’ve previously made part repayments, you’ll pay the equity loan percentage you still owe of the market value.
Example
| Market value of your home | Equity loan percentage | Amount |
|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 |
| Value at time of part repayment £220,000 | Paying back 10% | £22,000 |
| Value at time of full repayment £240,000 | Paying back 10% | £24,000 |
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