Help to Buy Definition
Help to Buy was a UK government equity loan scheme designed to help first-time buyers purchase a new-build home with just a 5% deposit. The government provided a loan of up to 20% of the property's value (40% in London), meaning the buyer only needed a 75% mortgage (55% in London).
The scheme launched in 2013 and closed to new applications on 31 October 2022. Over 380,000 properties were purchased through Help to Buy, making it one of the most significant government housing interventions in recent decades.
How Help to Buy Worked
- Available to first-time buyers only (from 2021; previously open to all buyers)
- Applicable to new-build homes only
- Regional price caps applied (e.g. £600,000 in London, £228,100 in the North East)
- The buyer provided a 5% deposit
- The government provided an equity loan of up to 20% (40% in London)
- The buyer took out a mortgage for the remaining 75% (55% in London)
- The equity loan was interest-free for the first 5 years
Repayment Rules for Existing Borrowers
If you bought a home through Help to Buy, the equity loan remains and must be repaid:
- Interest-free period: No fees for the first 5 years
- Year 6 fee: 1.75% of the outstanding loan value per year
- Annual increase: The fee rises each year by CPI + 2%
- Repayment triggers: You must repay when you sell, when you repay your mortgage in full, or after 25 years - whichever comes first
- Percentage-based: You repay a percentage of the property's current market value, not the original loan amount. If your home has increased in value, you repay more
- Partial repayment: You can repay in chunks of at least 10% of the property's current value
Help to Buy ISA vs Lifetime ISA
The Help to Buy ISA (closed to new accounts from November 2019) and the Lifetime ISA (LISA) are different products:
- Help to Buy ISA: 25% government bonus on savings up to £12,000 (maximum bonus £3,000). Bonus paid at completion. Closed to new accounts.
- Lifetime ISA: 25% government bonus on savings up to £4,000 per year (maximum £1,000 bonus per year). Can be used for a first home (up to £450,000) or retirement. Still open to 18–39 year olds.
Current Alternatives
With Help to Buy now closed, first-time buyers can explore:
- Shared Ownership: Buy a 25–75% share and rent the rest from a housing association
- First Homes: New-build homes sold with a 30–50% discount to local first-time buyers (discount stays with the property permanently)
- Lifetime ISA: Save up to £4,000/year with a 25% government bonus toward your first home
- Mortgage Guarantee Scheme: Government backing for 95% LTV mortgages, making it easier for lenders to offer low-deposit products
- Right to Buy: For eligible council tenants, purchase your home at a discount