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What is the Help to Buy scheme?

The “Help to Buy: Equity Loan” scheme was a UK government initiative aimed at assisting first-time buyers and existing homeowners in purchasing new-build homes. Introduced in 2013, the scheme played a significant role in addressing housing affordability and stimulating the housing market.

By offering equity loans that reduced the amount buyers needed to borrow from a mortgage lender, the scheme helped make homeownership more accessible.

While the scheme is now closed in most of the UK, you can still apply for Help to Buy in Wales.

So how does Help to Buy work?

With a Help to Buy loan, you can borrow up to 4.5 times your household income.

However, to utilise Help to Buy in Wales, the property you intend to purchase must be priced below £300,000.

How it worked

The Help to Buy: Equity Loan scheme operated through a series of structured steps:

  1. Eligibility: The scheme was available to first-time buyers and existing homeowners looking to purchase a new-build home. As of 2021, it was exclusively available to first-time buyers. Additionally, there were regional price caps that varied across the UK to ensure the scheme targeted homes within a reasonable price range.
  2. Loan Details: Buyers could borrow up to 20% of the property price (up to 40% in London) from the government. This loan was interest-free for the first five years. In the sixth year, an annual fee of 1.75% was charged on the loan’s value, increasing annually by the Retail Price Index (RPI) plus 1%.
  3. Deposit and Mortgage: Buyers had to provide a minimum deposit of 5% of the property’s value and secure a mortgage to cover the remaining amount. The combination of the deposit, mortgage, and equity loan had to cover the full property price.
  4. Repayment: The equity loan had to be repaid in full when the property was sold, the mortgage was paid off, or after 25 years, whichever came first. The repayment amount was based on the property’s market value at the time of repayment, meaning the loan amount could increase or decrease with the property’s value.


Consider a first-time buyer purchasing a new-build home worth £300,000:

  • Deposit: £15,000 (5% of the property price)
  • Equity Loan: £60,000 (20% of the property price)
  • Mortgage: £225,000 (75% of the property price)

In this scenario, the buyer needed a smaller deposit and a more affordable mortgage compared to purchasing without the equity loan.

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Key Benefits of the Scheme

  1. Reduced Deposit Requirement: The scheme lowered the deposit needed, making it easier for buyers to save enough to purchase a home.
  2. Lower Monthly Payments: With the government covering a portion of the property price through the equity loan, buyers faced lower monthly mortgage payments.
  3. Interest-Free Period: The first five years of the equity loan were interest-free, providing significant financial relief in the initial years of homeownership.
  4. Property Market Access: The scheme helped buyers access the property market sooner than they might otherwise be able to.

Case Studies

See below the following examples:

  1. First-Time Buyers in London: A young professional couple in London used the Help to Buy: Equity Loan scheme to purchase a £400,000 new-build flat. With a £20,000 deposit (5%), a £160,000 equity loan (40%), and a £220,000 mortgage (55%), they were able to buy their first home in a high-cost area, reducing their initial financial burden.
  2. Regional Impact: In northern England, where property prices are generally lower, a first-time buyer purchased a new-build home worth £200,000. With a £10,000 deposit (5%), a £40,000 equity loan (20%), and a £150,000 mortgage (75%), the buyer accessed the housing market sooner than anticipated, benefitting from lower monthly mortgage payments.

What Other Buyer Schemes Are Available?

There are several other schemes to help first-time buyers get onto the property ladder:

  • Mortgage Guarantee Scheme: This scheme allows you to take out a 95% mortgage and is open to new applications until 31 December 2023.
  • Deposit Unlock: With this scheme, you can buy a new-build home with just a 5% deposit and benefit from a competitive mortgage rate.
  • Shared Ownership: This option enables first-time buyers to purchase a share of a property and pay rent on the remaining portion.
  • First Homes Scheme: This initiative offers local first-time buyers and key workers the opportunity to purchase a home at a 30% to 50% discount.