Help to Buy Properties in London
Help to Buy in London
Help to Buy is the name of a government scheme in the United Kingdom that aims to help first time buyers purchase residential property. When purchasing a new apartment or house in London, the buyer can apply for a loan of up to 40% of the value of the property. After that, the buyer must post a security deposit of 5% and obtain a mortgage, which will cover the remaining 55% of the price of the housing. Note that some changes were made to the government Help to Buy program in 2021. Previously, it was available to everyone but now only first-time buyers can apply for this government scheme.
How does London Help to Buy works?
Help to Buy London developments, which you can purchase under this program, provides exclusively new-build properties. Using the scheme, the buyer receives a loan in the form of equity participation, which is interest-free for the first 5 years. At the end of this period, he pays interest at 1.75% starting in the 6th year. The interest rate increases annually. The buyer has 25 years to fully repay the loan if he does not sell the property before then. In the event of a sale, the purchaser must repay the loan. Thus, in order not to pay high interest on the loan, it is better to try to pay the entire amount in the first 5 years.
It is essential to remember that it is the value of the home that affects the loan amount. So, what happens if property costs rise or fall? As your Help to Buy equity loan depends on the market value of your home, any change in real estate prices can affect the amount you have to repay. That is, if the value of real estate rises by 10%, then the interest rate that you need to pay rises in accordance with the already new value. It must be considered when deciding if you are going to purchase one of the Help to Buy London properties.
| Example of Help to Buy in London | ||
| Cost of the home is £250,000 | ||
| Cost name | Percentage of total | £ value |
| Your deposit | 5% | £12,500 |
| Equity loan | 40% | £100,000 |
| Mortgage | 55% | £137,500 |
| TOTAL | £250,000 | |
What are the eligibility criteria for London Help to Buy?
To participate in the London Help to Buy program, you have to comply with the established rules.
Requirements:
- Be at least 18 years old.
- Be a first-time buyer, meaning that you have never owned other real estate or homes, either in the UK or abroad.
- Require at least a 5% deposit of the total purchase price of the house.
- The value of the real estate you are buying can not be more than the regional price cap for your area (see the full list of price caps below).
- You must be able to prove you can afford the mortgage repayments and other outgoings on the property you want to buy.
Not allowed:
- Owning a home or land anywhere in the world at any time.
- To have had any form of sharia mortgage finance.
- Owning a home bought with other people or inherited.
- Being married or in a cohabiting relationship, either now or on legal completion with anyone who owns or has owned a home or land anywhere in the world.
- Purchasing a second home.
Remember:
- Part Exchange is not available through the Help to Buy scheme.
- You cannot sublet your Help to Buy home.
Help to Buy Regional Price Caps
| Region | Help to Buy price cap |
| London | £600,000 |
| 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 |
| South East | £437,600 |
| South West | £349,000 |
London Help to Buy Repayments
- The period without interest for Help to Buy mortgages lasts for the first 5 years, so it is best if possible to repay the loan at the end of this period. If this has not happened every year in April, the interest on your equity loan will increase by the Consumer Price Index (CPI), plus 2%.
- Thus, in the sixth year, the percentage will be 1.75%. In the seventh year, you will pay 1.75% + CPI + 2% (but if you took out a stock loan before December 2019, it will be + 1%). And according to a similar scheme, the interest rate of the Help to Buy mortgage will increase every year. That being said, you will pay a £1 monthly fee for management by direct debit, as when you take out a stock loan, you agree to pay back the full, interest and management fees.
- Stamp Duty tax is a property transaction tax. The tax is due to be paid on any property which is purchased at a price of more than £125,000. However, in the Help to Buy scheme only first-time buyers do not need to pay Stamp Duty for properties up to £300,000.
London Help to Buy pros and cons
If the buyer does not have the total amount of money to purchase the new home, then the opportunity to buy one of the Help to Buy houses in London through a government program seems tempting. But before deciding on this step, you need to know everything about the advantages and disadvantages of the program.
| Pros | Cons |
| + Full ownership. The buyer owns 100% of the purchased home. | - New buildings only. Help to Buy houses do not cover resale properties. |
| + Small deposit. The buyer needs to pay a deposit of only 5% of the total value of the house. | - Regional prices. In each region, prices are set, which should not exceed the purchased house. |
| + 5-year interest-free period. The buyer can manage to pay the cost of the house during the first 5 years and not pay interest on top at all. | - Not a fixed amount. If the property price rises, the buyer pays interest on the new value. |
| + Family income does not matter. The purchase of Help to Buy real estate does not provide for maximum family income restrictions. | - Growing interest. At the end of the interest-free time, the interest rate increases annually. |
| + 25 years to pay off the loan. You have a long enough period of time before you have to repay the loan in full. | - Remortgage is a question. Many remortgage deals are only accessible to those who have paid off their loan. |
| + Low mortgage rates. | - Repair permit. Before you can start improving your apartment or house, you need to get a permit. |
London Help to Buy. How to apply?
If you decide to become a member of the Help to Buy program, here is a small guide on how to do it:
- Book the desired apartment in the new building. Please note that the developer must be registered under the scheme.
- Contact the Help to Buy agent in your area and apply online.
- Wait until the Help to Buy agent assesses your eligibility. Then he will issue an Authority to Proceed.
- Authority to Proceed allows you to apply for a mortgage and promote your application prior to exchanging contracts. Then get an Authority to Exchange issued by Agent Help to Buy.
- Receive a Transaction Confirmation, which allows the legal completion of the construction and the transfer of funds to the developer. The Help to Buy agent will be able to issue this document when all documents and dates are agreed and the house is built.
- After completing the legal process, the Help to Buy agent transfers your details to the capital loan administrator to manage the loan account until it is paid in total.
Popular locations for Help to Buy
- Help to Buy properties in Greater Manchester
- Help to Buy properties in Berkshire
- Help to Buy properties in Buckinghamshire
- Help to Buy properties in Essex
- Help to Buy properties in Hertfordshire
- Help to Buy properties in Kent
- Help to Buy properties in Manchester
- Help to Buy properties in Surrey
FAQ
- What is the interest charge on a Help to Buy: Equity Loan?
The first five-year period of the Help to Buy: Equity Loan is interest-free. After these five years, you will be charged 1.75% on the outstanding amount as interest. The fee will increase annually by CPI plus 2%. You must only repay the interest, not the equity loan.
- Can I put more than a 5% deposit down with Help to Buy?
To take advantage of the Help to Buy scheme, you will need a minimum 5% deposit. But you can make a large amount of the deposit, which will reduce the size of the loan provided by the government. For example, with a deposit of 10%, the equity loan will be 10%, and the mortgage will be 80% to cover the rest of the property value.
- What happens after 5 years of Help to Buy?
At the end of the interest-free period, the buyer begins to pay interest on the loan. But this does not mean that you repay the loan itself. Beginning in the sixth year, the buyer is charged interest of 1.75%, which increases each year in April based on the inflation rate at the time (according to the Consumer Prices Index), plus 2%.
- Can I use Help to Buy if I have previously owned a property?
No, as the Help to Buy program is only accessible for first-time buyers. To be considered a first-time buyer, you need to have never owned a property.
- Who qualifies as a first time buyer?
A first-time buyer is a person that does not own, or has never owned, a house or residential land now or in the past in the UK or abroad.
- Can I use Help to Buy for any house?
The Help to Buy program is used only for new-build properties and can't be used to buy a second home or a buy-to-let property.
- How can I find available Help to Buy properties in London?
Remember that the Help to Buy properties only covers new build properties in London. Korter provides a special filter of Buying Schemes -> Help to Buy, where you can see all the properties that support the Help to Buy scheme in London.
- How much deposit do I need?
You will need a minimum deposit of 5% as the government provides a 20% equity loan and a mortgage part accounts to 75%.
- When do I pay back the equity loan?
The Help to Buy equity loan must be paid when the house is sold or at the end of the mortgage period. It depends on what happens first. In addition, it is allowed to pay part of the amount without selling the house. The buyer can pay 10%, 20% or the full amount if the loan is at least 10% of the value of his home.
- Can I own a Help to Buy home and buy a second home?
No. If you can afford to buy another home you will have to repay the Help to Buy Equity Loan.
Prices for new buildings in London areas
| Westminster | from £2 492 / ft2 |
| City of London | from £1 370 / ft2 |
| Islington | from £767 / ft2 |
| Camden | from £1 450 / ft2 |
| Kensington and Chelsea | from £2 496 / ft2 |
| Lambeth | from £1 372 / ft2 |
| Tower Hamlets | from £786 / ft2 |
| Hackney | from £955 / ft2 |
| Southwark | from £858 / ft2 |
| Wandsworth | from £975 / ft2 |
| Hammersmith and Fulham | from £1 136 / ft2 |
| Waltham Forest | from £585 / ft2 |
| Haringey | from £718 / ft2 |
| Newham | from £577 / ft2 |
| Brent | from £657 / ft2 |
| Lewisham | from £596 / ft2 |
| Greenwich | from £652 / ft2 |
| Barnet | from £707 / ft2 |
| Ealing | from £668 / ft2 |
| Merton | from £660 / ft2 |
Prices for apartments in London areas
| Westminster | from £525 000 |
| City of London | from £785 000 |
| Islington | from £530 000 |
| Camden | from £570 000 |
| Kensington and Chelsea | from £675 000 |
| Lambeth | from £440 000 |
| Tower Hamlets | from £380 000 |
| Hackney | from £320 000 |
| Southwark | from £290 000 |
| Wandsworth | from £340 000 |
| Hammersmith and Fulham | from £387 500 |
| Waltham Forest | from £300 000 |
| Haringey | from £417 500 |
| Newham | from £276 995 |
| Brent | from £285 000 |
| Lewisham | from £360 000 |
| Greenwich | from £345 000 |
| Barnet | from £360 000 |
| Ealing | from £295 000 |
| Merton | from £400 000 |
Prices for new buildings in other cities
| Hertfordshire | from £567 / ft2 |
| Surrey | from £612 / ft2 |
| Essex | from £415 / ft2 |
| Buckinghamshire | from £581 / ft2 |
| Berkshire | from £456 / ft2 |
| Kent | from £407 / ft2 |
| Milton Keynes | from £349 / ft2 |
| Manchester | from £366 / ft2 |
| Greater Manchester | from £334 / ft2 |
Prices for apartments in other cities
| Hertfordshire | from £250 000 |
| Surrey | from £155 000 |
| Essex | from £225 000 |
| Buckinghamshire | from £195 000 |
| Berkshire | from £225 000 |
| Kent | from £168 000 |
| Milton Keynes | from £214 995 |
| Manchester | from £160 000 |
| Greater Manchester | from £125 000 |