Published 25 Nov 2021

Mortgages

How does a Help to Buy mortgage work?

Help to Buy scheme is a Government backed scheme which helps buyers in the UK to get onto the property ladder. The Help to Buy equity loan limit was raised from 20% to 40% of the properties purchase value for homes in all London boroughs to reflect the higher property values seen across London.

How does Help to Buy work?

If you wish to purchase a home, you will need to contribute as little as a 5% deposit on a newly built home and your Help to Buy mortgage will make up the rest after the 40% equity loan. Currently Help to Buy in London offers equity loans to buyers looking to purchase a new build home with a purchase price up to £600,000. Borrowers benefit from not paying any interest on this loan for the first five years.

For more information and to see if you are eligible for the Help to Buy scheme in London, speak to a member of the Peabody team on 020 7021 4842 or alternatively email enquiries@peabodysales.co.uk. 

Things you need to know before applying for Help to Buy:

Help to Buy eligibility extends only to newly built homes which can be worth up to £600,000 in London. When you buy your new home with London Help to Buy:

  1. You must be able to afford any interest payments, as well as the monthly fee. Equity loans are interest-free for the first five years.
  2. You must not own any other property at the time you buy your new home
  3. You must not enter a part exchange deal on your old home
  4. You must not sublet or rent out the property, it must remain your primary residence after you buy it
  5. You'll need a deposit worth at least 5% of the property you hope to buy to qualify for Help to Buy
  6. Lastly, you'll still need to be accepted for a mortgage for the amount that is not covered neither from Help to Buy, nor your deposit.

Can you put down more than a 5% deposit?

Yes, you can put down a deposit larger than the required min. 5%. For instance, if you decide to put down 30% deposit you can still get a 20% equity loan, meaning you'd only need a 50% LTV mortgage. 

How to apply for Help to Buy?

What's affordable for you?

There are several options for first-time buyers aimed at helping them get their foot on the housing ladder. Different schemes may be suitable for people in different circumstances. That's why it's very important to do your research and weigh your options. And remember that Help to Buy scheme is only available if you are buying a new home in England. 

Next steps:

  • You first need to reserve the home you want to buy through a Help to Buy registered housing association and homebuilder such as Peabody.
  • You'll then need to apply for the Help to Buy mortgage itself, which, could be done through a Help to Buy mortgage advisor.

Helping you to own your home

With the Government backed Help to Buy scheme, buyers in London can get assistance buying a home with an equity loan of up to 40% of the property purchase price.

The importance of using specialist advisors

An important point to remember if you are looking into Help to Buy homes, is to ensure you hire a mortgage or financial adviser that has expert knowledge in this scheme. 

Housing Associations like Peabody, and the mortgage brokers they work with will often have panels of solicitors that they recommend who specialise in affordable housing.  Whilst a solicitor may be recommended to you on behalf of a housing association, the solicitor is duty bound to act in the buyers best interest, not the sellers.

Recent changes to the Help to Buy scheme

A new version of the Government's Help To Buy scheme came into effect on 1 April 2021 and will run until Mar 2023.
This version of the Help to buy scheme will no longer be available to existing home owners and will be restricted to first time buyers only

The previous scheme was available to anyone that wanted to buy a new-build home in England and was also available for properties up to £600,000 across the country.

Whereas, the new Help to Buy loan will include regional price caps, helping to ensure that those who need the scheme most will be able to use it.

Find a home with Peabody

Peabody are one of the largest housing associations in the UK with a selection of Shared Ownership homes available throughout London and the South East. Take a look at our property search to find the perfect home for you.


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