Launched by the government in 2013, Help to Buy Equity Loans are aimed at helping those who are struggling to get on the property ladder.
There are different Equity Loan schemes for England, Greater London, Wales and Scotland, and they all vary slightly.
In a nutshell, with the Help to Buy Equity Loan scheme:
- The government will lend you up to 20% of the cost of your new build home. This increases to up to 40% of the cost if the property is in London. This is called an equity loan.
- You’ll need to save a minimum of 5% of the purchase price as a deposit, and you can use contributions from your Help to Buy ISA or Lifetime ISA to pay this. The remaining 75% comes from a specialist Help to Buy mortgage product.
- As you’ll have a larger deposit, you won’t need to raise as much of a mortgage. This means your initial mortgage payments will be lower. It should also help with affordability calculations when you apply for your mortgage.
- The equity loan is interest-free for the first five years and you don’t need to make any repayments on it during that time.
What’s different about the new Help to Buy Equity Loan scheme?
The new Help to Buy Equity Loan scheme is running from April 2021 to March 2023, and has some major differences compared to the previous scheme:
- Only first time buyers will be able to use the new Help to Buy Equity Loan scheme.
- New regional price caps will be introduced. As a result, the maximum value of homes that can be bought with the scheme's help will be dramatically cut in most areas. The caps have been set at 1.5 times the average first time buyer price in each region (as of Autumn 2018).
What are the regional price caps?
| Region |
Price Cap |
| 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 |
What are my other options?
While Help to Buy has been popular with first time buyers, it’s not the only route available if you have a small deposit.
- 95% mortgages: The average rates on mortgages that require just a 5% deposit have reduced significantly in recent years. This has made them considerably cheaper. And unlike with the Help to Buy Equity Loan scheme, you won’t be restricted to new build properties. However, as James explains above, you may struggle to get a high loan to value mortgage on a new build property.
- Shared ownership: Also known as ‘part buy, part rent’, this scheme allows you to buy a share of a property and pay rent on the rest. And as you'll only need a mortgage for the share you’re purchasing, you'll need a much smaller deposit than if you were buying the home outright. Find out more about shared ownership here.
- Guarantor mortgages: This is when a parent or close family member uses their own property or savings as security against your loan. This means lenders may accept a smaller deposit than usual and sometimes they won’t require any deposit at all.
Want to explore your buying options? Want to use a remortgage to fund an extension / renovation? No matter your goals, Resi Finance is here to help. Working in partnership with Mortgage Advice Bureau, we're able to offer free consultations to all homeowners - current and perspective. Book yours here.
