Buy a new home with a 5% deposit

With a Help to Buy Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home.

Buying Is Easier Than You Think...

How does it actually work?

Help to Buy is a government backed scheme designed for any buyer who is looking to purchase a new build home up to the value of £600,000. An equity loan between 10-20% is available to make your purchase more affordable, and you will be able to move in with only a 5% deposit.

Who is eligible?

Equity loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000. You won’t be able to sublet this home or enter a part exchange deal on your old home. You must not own any other property at the time you buy your new home with a Help to Buy: Equity Loan.

Can I buy a home off plan?

Yes. You are able to reserve a new home off plan at any time. However, you need to complete the sale within six months from the exchange of contracts. You also need to ensure that your mortgage offer is valid through to legal completion.

Can I buy with an interest-only main mortgage?

No. Your main lender’s mortgage must be a repayment loan with interest and capital repaid every month. This ensures you make the Help to Buy purchase on a sound basis and protects the tax payers’ investment in your home.

Can I part exchange my existing home for a Help to Buy home?

No. Part exchange is not available. House builders selling Help to Buy homes cannot offer a part exchange sale.

Will I have to pay Stamp Duty?

The Government’s standard rules and procedures for Stamp Duty Land Tax (SDLT) apply to all Help to Buy purchases. SDLT is payable at the time of purchase, on the full purchase price of the home. That is, the amount paid by you (the first mortgage and any cash contribution) plus the value of the Help to Buy loan. There is no further SDLT to pay on any ‘staircasing’ repayments or repayment when the home is sold. You should budget for SDLT on the full open market price of the property when you purchase a Help to Buy home.

Who provides the Government’s contribution for Help to Buy?

The equity loan is provided by the Homes and Communities Agency and administrated by your local Help to Buy agent. The contribution is secured by a second charge on your property title registered at the Land Registry.

After five years of ownership how is the fee collected?

Fees can be paid in a single yearly payment or in monthly instalments. The Post Sales Help to Buy Agent will collect your fee by direct debit or standing order. They will contact you at least a month before your fees are due, to set up your repayment arrangement. If you do not pay by Direct Debit, you will pay an additional administration charge (currently £4 per month). You will also receive a statement each year confirming when your fees are payable. The annual statement will also show any payments you have made once you start paying the fee.

Can I get help with benefits to pay the Help to Buy fees if, for example, I lose my job?

Because Help to Buy fees are not classified as rent, they do not qualify for Housing Benefit. You should make sure you have made arrangements to ensure you can continue to make your Help to Buy payments if your income stops. You should seek independent financial advice about this before purchasing a Help to Buy home.

Can I use cash from my council, Housing Association or other public sector body to buy with the addition of help through Help to Buy?

Yes, provided that your local council is satisfied that this represents value-for-money and the other funding is compatible with Help to Buy. Any funding provided that must be secured against your home would not be compatible with the Help to Buy scheme.

After purchasing my home, can I increase my mortgage or take out another loan?

Not without permission from the Post Sales Help to Buy Agent. Further advances must be approved by the Post Sales Help to Buy Agent. Advances to be used for repaying the equity loans in part (staircasing) or full will usually be welcomed and approved. Advances for other purposes will be considered by the Post Sales Help to Buy Agent on a case by case basis.

Example of buying a £200,000 home

If the home in the example was then sold by you for £210,000, you’d get £168,000 (80%, from your mortgage and the cash deposit) and you’d pay back £42,000 on the loan (20%). You’d need to pay off your mortgage with your share of the money. For more information please download the Help to Buy Buyers’ Guide.

Download the Guide

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