How does Help to Buy work?
Mortgage affordability calculator
To work out your monthly repayments and whether you can meet them, use our Mortgage affordability calculator
Region | Help to Buy price cap |
---|---|
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 |
London |
£600,000 |
South East |
£437,600 |
South West |
£349,000 |
Applications for the Help to Buy equity loan will run until 31 March 2023.
We will point you in the right direction
Start a webchat online or call us on 0800 138 1677
Find out more about Help to Buy:
Cost name | Percentage of total | £ value |
---|---|---|
Your deposit |
5% |
£10,000 |
Equity loan |
20% |
£40,000 |
Mortgage |
75% |
£150,000 |
TOTAL |
|
£200,000 |
When the interest-free period ends, the interest rates charged on your loan will go up each year in April by the Consumer Price Index (CPI), plus 2%.
Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + CPI + 2% (1% if you took the equity loan before December 2019)
You will also pay a £1 monthly management fee by direct debit. When you take out your equity loan, you agree to repay it in full, plus interest and management fees.
Year | Interest rate |
---|---|
1 |
No interest payments |
2 |
No interest payments |
3 |
No interest payments |
4 |
No interest payments |
5 |
No interest payments |
6 |
1.75% |
7 |
1.82% |
8 |
1.90% |
The figures above assumes CPI is constant at 2% and no reduction in the loan amount.
From the table, your first interest payment will be 1.75% of the amount you borrowed.
Your interest will go up each year in April by the CPI, plus 2%. This is worked out by multiplying the loan amount (purchase price x equity loan percentage). The equity loan percentage will reduce if any part repayments are made.
The interest rate increases every year by adding CPI plus 2%. The interest rate from the previous year is then used to work out the interest rate rise for the following year.
For example, the following shows how any interest rate increase is calculated assuming CPI remains constant at 2% and no payments are made to pay off the government loan:
1.75% (the rate in year 6) + 0.07% (1.75% x (0.02 CPI + 0.02) = 1.82%
1.83% (the rate in year 7) + 0.07% (1.83% x (0.02 CPI + 0.02) = 1.90%
When you sell your home, or the mortgage is paid off, you have to repay the equity loan plus a share of any increase in the value.
Increase in value |
25% |
Equity loan repayment |
£50,000 (£40,000 + 25% profit) |
Mortgage |
£150,000 (less capital repayments) |
Your share |
at least £50,000 |
The remaining £50,000 (or more) can be used as a deposit on your next home.
The exact amount depends on how much you’ve paid off your mortgage.
You can also pay back part or all of your loan at any time.
The minimum percentage you can pay back is 10% of the market value of your home.
The amount you pay will depend on the market value at the time.
Speak to the Help to Buy agent in your local area or a local developer who is registered with Help to Buy.
This article is provided by the MoneyHelper.