Find a Solicitor for your

Help to Buy Assistance

Help to Buy schemes give first-time buyers a leg up onto the property ladder at a time when house prices seem to be rising ever higher.

The is a comprehensive guide about the Help to Buy scheme. We cover eligibility, the application processes, repayment obligations, and how Lawhive can assist prospective homeowners. 

We’ll highlight the benefits and legal implications of the Help to Buy scheme and outline why seeking professional legal advice can help you navigate the complexities of the scheme effectively.

We’ve written this for: 

• First-time buyers

• Existing help to buy participants

We can provide practical advice and guidance for first time buyers looking to utilise the Help to Buy Scheme. Get in touch with our Help to Buy solicitors today.

What is help to buy?

The Help to Buy scheme or schemes to be more accurate, is a series of government-backed schemes designed to help first-time buyers buy a house and get on the property ladder. 

There are a number of different schemes:

• Help to Buy: Equity Loan (England)

• Help to Buy: Shared Ownership (England)

• HOLD (Home Ownership for People with Long-Term Disabilities (England)

• Older People’s Shared Ownership (England)

• Help to Buy ISA – closed to new accounts, existing account holders can save until 2029

• Help to Buy Wales

• Forces Help to Buy – can be used alongside other schemes

• Save to Buy – enables first-time buyers to move into a home and pay fixed rent for between six months and two years

• Rent to Buy – allows first-time buyers to rent a property at a discount

• Affordable Homes Ownership Scheme 

The purpose of the schemes when they were launched in 2013 was to help first-time buyers

with lower deposits get on the property ladder at a time when lenders were unwilling to

make what they considered risky investments. 

They helped first-time buyers buy a property with just a 5% deposit. The government lent borrowers between 5% and 20% of the cost of a new build-home as an equity loan.

What is an equity loan?

An equity loan, also known as a home equity loan or a second mortgage, is a type of consumer debt with the loan amount being the difference between the home’s market value and the amount of mortgage balance owed. 

It is a set amount offered at a fixed interest rate, and funds are received by the borrower in a lump sum and repaid over the loan’s term. 

The eligibility criteria for the Help to Buy scheme are as follows:

• You should be a first-time buyer

• You cannot have an overdue loan payment 

• You must contribute a minimum 5% deposit to the purchase of the property

Key features of the equity loan include:

• Buyers can apply for a 20% equity loan (40% in London)

• Buyers must put down a 5% deposit

• The rest of the property price is mortgaged

• The loan is interest-free for the first 5 years

• By the sixth year, buyers are charged 1.75% interest

How to apply for a help to buy equity loan

Here is a step-by-step process of how to apply for a help to buy equity loan. 

Remember, that you can no longer apply for a Help to Buy equity loan unless you’re in Wales or partway through an application. 

Here’s the application form to apply for a Help to Buy loan in Wales. 

If you’re part way through an application, follow these steps:

• Find a registered Help to Buy agent

• Pay a reservation fee, a minimum of £500

• Pay a deposit on exchange of contracts

• Pay conveyancing fees on completion

• Complete a Help to Buy “Property Information Form” from the house builder

• Reserve the home

• Send the signed Property Information Form and a copy of the builder’s signed reservation form to the Local Help to Buy Agent

There are several required documents and legal declarations needed to apply for a help to buy equity loan. 

The following documents are required:

• Proof of income

• Home valuation

• Current mortgage details

Any conveyancing transaction requires a solicitor to review and complete relevant documentation. With Help to Buy, it is important to have legal representation from a solicitor experienced with the schemes, as they can be complex. It is crucial to get the right advice.

Common mistakes to avoid when applying:

• Not getting multiple quotes from lenders

• Borrowing more than you need – leads to higher monthly repayments

• Applying with bad credit – this can lead to your application being turned down, check before applying

• Not understanding the risks of borrowing

Repaying your help to buy equity loan

You can repay your loan when you sell your home or remortgage. 

You can also repay your Help to Buy equity loan early at any time. Because the first five years are interest-free it makes sense to pay off as much as you can in this period.

To begin repaying you will need to apply to repay. You can apply to repay with the help of a conveyancer. This application is a formal legal agreement. You can apply on the Law Society website or the Council of Licensed Conveyancers’ website.

You need to consider things that could have affected the value of your home before you apply. This includes external cladding. You may need to get a valuation of your property. 

The repayment schedule is 25 years from the date you took the loan out. Most homeowners decide to start repaying early after the 5-year repayment window ends.

The amount you repay depends on the value of your home when you start repaying. This is because you borrow a percentage of your home’s value, not a fixed amount. When your home’s value increases or decreases, so does the amount you owe. 

As an example:

If your property is worth £200,000 and it increases in value to £250,000, a 25% increase, your loan equity repayment would be £50,000, instead of £40,000 (this would be 25% of the value). 

After the 5-year interest-free period ends, you’ll pay 1.75% interest in year 6. From year 7 onwards you’ll pay 1.75% + CPI + 2% - or 1% if you took out the loan before December 2019.

When you want to repay early – this is known as staircasing – you can make repayments at any time, however, repayments must be at least 10% of your home’s market value. Specific lenders may have their own requirements for staircasing and you’ll need to have an independent valuation every time you wish to make a repayment.

Gov.uk has a helpful guide on managing your equity loan.

Can you remortgage a help to buy property?

After your five-year interest-free period has ended you can choose to remortgage your property. 

Your Loan to Value (LTV) ratio – the amount you borrow in a remortgage compared to the property’s value – will shape the choice and value of remortgage products that lenders are willing to lend you.

You need permission to remortgage from your Help to Buy scheme administrator. A solicitor or conveyancer can manage this process for you.

You’ll need to provide paperwork, evidence and permission for your remortgage. You will benefit from updating your credit report to update outdated information or mistakes.

If you don’t choose to remortgage, or can’t find a deal you’re happy with, you will be transferred to your lender’s Standard Variable Rate (SVR). This is usually a much higher rate than the interest-free period and you’ll pay more overall if you don’t remortgage.

How do you sell a help to buy property?

The process of selling a help to buy property involves several steps that you’ll want to follow carefully. 

You can sell your help to buy home at any point. If you still owe money on the loan, this will be paid from your share of the sale proceeds. If your mortgage was 20% for example, your repayment will be 20% of the total market value when the property is sold.

If your property value has increased, the amount you owe will increase.

As an example, say you bought a home worth £200,000 using a 20% government equity loan worth £40,000. If the value rose by 10% to £220,000, the amount you borrow would grow by 10% too. You’d need to repay £44,000, £4,000 extra due to the rise in property value.

What are the legal implications of the help to buy scheme?

If you buy a home on a Help to Buy scheme, you will own the share of the property you purchased, the remainder of the equity and land is owned by the housing association. As you staircase, you own the additional equity you purchase. Typically, shared ownership homes are mortgaged at 20%, so if you staircase (usually at 10%) twice before you sell, you will own 40% equity. 

You can staircase to 100% equity, which will mean you own the home. However, most shared ownership schemes are operated on a leasehold basis, which means you will own the lease for a fixed period, usually up to 125 years, some newer leases are up to 999 years. There have been changes to these rules which we’ll discuss later.

Negative equity, when your property is worth less than the remaining value of your mortgage, can occur in shared ownership properties. This can happen when house prices fall, shared ownership homeowners may need to wait for house prices to rise, or lose money when they sell their home.

Help to buy and leasehold properties 

Restrictions have been placed on leasehold properties by the Leasehold and Freehold Reform Act 2024. It has not come into effect yet.

The act increases standard lease terms to 990 years for houses and flats. This means leaseholders have more secure ownership without the expense and effort of lease extensions. 

It will make it cheaper for some leaseholders to extend their lease. 

When you own a flat you will be a shared ownership freeholder, which means you own a percentage of the freehold of the building. A share of freehold is held by individual leasholders, the other shares are divided between the other leaseholders in the building.

How Lawhive can assist with help to buy 

At Lawhive’s we provide legal services for Help to Buy Scheme participants. We can advise you on whether help to buy is beneficial for you and help you gather all the necessary information and documents required to make an application.

At Lawhive, you can choose from a range of property solicitors for your conveyancing needs and legal advice, all from the comfort of your own home. 

We can also offer legal advice for buyers of leasehold properties under help to buy.

What is the maximum amount I can borrow with help to buy?

You can borrow up to 20% of the market value of a new build, or 40% outside London. 

Can I use help to buy if I’ve owned a property before?

You cannot use the Help to Buy scheme if you already own a property. A property purchased with Help to Buy must be your primary residence, or be used by a member of your immediate family.

What happens if I can’t keep up with my help to buy loan repayments?

Your property could be repossessed if you cannot keep up with repayments on your mortgage.

Legal services for Help to Buy assistance 

The Help to Buy Scheme ISA has ended in England, however, it is still open for applications in Wales.

Despite this, there are still several schemes open to first-time buyers to help them onto the housing ladder. Our solicitors can help you navigate these.

If you have got this far and are interested in legal assistance for Help to Buy, contact Lawhive for a free case evaluation and quote today.

Using our online platform is both simple and cost-effective, so get in touch now.