 scheme (also known as the Help-to-Buy Equity Loan) is ending on the 31st of March 2023. But what most people don’t realise is that the scheme closed to new applicants on the 31st of October 2022.

So, if you were hoping to use help-to-buy, it's too late…

If you didn't manage to get your application in before the deadline, don’t worry. Here’s the run-down on everything Help to Buy, the best alternatives, and how you can buy your first home without the government scheme.

Here’s everything you need to know about Help to Buy ending.

How to buy your first home now that help to buy is ending

Basically, the government loans you up to 20% of the purchase price of a new-build home. You’d put down at least a 5% deposit and buy the rest of the home with a traditional mortgage.

So, let’s say you wanted to buy the average UK home (286,000*):

The government would lend you £57,200 (20%)

You’d take out a mortgage for £214,700 (75%)

 for 5 years. After that, you’ll be charged 1.75% in interest, but this price will increase every year by the Consumer Price Index (CPI), plus an additional 2%.

Can’t borrow enough with a mortgage to buy the home you actually want?

Help to Buy doesn’t work for everyone. A 5-year interest-free loan sounds like a great deal, but there are a few factors to bear in mind.

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

You have 25 years to pay the loan back in full

You can only use the help to buy scheme to buy new-build homes, so your choice of home and location is limited

You can’t buy a home worth over the regional price cap

You’ll still need to get a mortgage, so you might be limited by how much you can borrow

You have to be a first-time buyer to use the scheme

When you want to buy more of your home, you’ll have to pay extra fees

The Help to Buy Equity Loan scheme was always going to end officially in March 2023. When the scheme was revealed back in 2018, the Government announced that it would run from the 1st of April 2021 to the 31st of March 2023.

The reason new applicants had to submit their application by the end of October 2022 is so that they can legally complete on their house before the scheme officially ends. And, as of March 2023, there has been no official announcement of a replacement for the Help to Buy Equity Loan scheme.

Rooftop View of a Quaint Town

Although the Government Help to Buy Scheme is ending soon, you can still get help to buy your first home. We’ll talk you through some of the alternatives, so you can work out the best option for you.

Shared Ownership is another government scheme that helps first-time buyers get onto the property ladder. With Shared Ownership, you start by buying 25% of your home and pay rent on the remaining 75%.

But, you’ll be limited to the types of homes you can buy—either a new build home or a resale home:

Usually in large developments or areas of regeneration, new builds are the most common type of home to buy with Shared Ownership. One drawback with new builds is that you generally buy your share before the home is built, which means you won’t be able to see it properly until you’ve already bought it.

Resale homes are essentially new builds that someone else has bought through the Shared Ownership scheme. The upside of opting for a resale home is that you can get a better idea of what the home is like before you buy.

Something to keep in mind when it comes to Shared Ownership is that you may need to get a mortgage to buy your home. So, when you’re thinking about how much you can afford, know that you’ll be paying a mortgage (with interest) on top of your monthly rent.

Buying more of your home with Shared Ownership

Like with Wayhome, you can buy more of your home over time with Shared Ownership—this is known as 

. The difference is, with Shared Ownership you have to buy at least 1% of the home each time.

So, if you were to buy the average UK home (£286,000), your staircase payments would have to be at least £2,860 (1%).

For some, Shared Ownership may not be flexible enough to buy the home you 

Shared Ownership compares to Gradual Homeownership

Gradual Homeownership is the new way to buy a home worth 10x your household income completely debt-free, with just a 5% deposit and no mortgage. You buy the part of the home you can afford today, then gradually buy the rest over time with no additional fees.

Plus, there’s no pressure to buy a certain amount with your staircasing payments—you can buy as little as £50 each time.
We don’t believe people should have to compromise on the things that matter to them just to get on the property ladder. Whether that’s:

moving away from the area you know and love

buying a 2-bed flat instead of a 3-bed house

missing out on that garden you’ve always dreamed of…

We believe buying your first home should feel like a step up, not a sacrifice. That’s why we created Gradual Homeownership—so that you can buy the home you actually want in the area you love.

Help to buy may be ending, but Wayhome is here to stay. There’s no deadline to buy your first home with our help and you can get started whenever you’re ready.

Help to Buy has now closed to new applicants. Here’s everything you need to know about the scheme ending and alternative options for first-time buyers.

Help to Buy is Ending: What are the alternatives in 2023?

Help to Buy Equity Loans were introduced by the Government in 2013 as a scheme to help buyers to get onto the property ladder who felt that they were becoming priced out of the market or who were struggling to be able to save up a large enough deposit to buy the home that they wanted with a traditional mortgage product.

Important: The Help to Buy Equity Loan Scheme has ended.

In this article, we explore more about how the Help to Buy Equity Loans work and also have a look at both the positives and the potential downsides to them too, so that you can understand if they are a good option for you.

Please note that there are separate, but similar, schemes operating for Scotland, Wales and Northern Ireland.

What is the Help to Buy Equity Loan Scheme?

The Government will own an equity share in your home

The important thing to note is that the Government loan is an equity loan, meaning that they own up to 20% of your property (or 40% in London), so if you are in a position to pay back some of the loan you need to be aware that the total amount you have to repay may be higher than the amount that they loaned to you if the value of your property has gone up.

The equity loan is interest free for the first five years, so it’s worth factoring into your budget the fact that after 5 years you will need to payback the interest on the loan each month on top of paying back your mortgage. You should get independent financial advice when you first take out your mortgage so that you are aware of what these costs might be in the future.

Example of how Help to Buy Equity Loans work:

If you wanted to buy a home for £250,000 under the Help to Buy Equity Loan Scheme, you would need:

In addition to the interest that you pay on the loan after the first five years there is also a monthly management fee of £1 that kicks in from as soon as you buy your home until you have paid back the full amount of the equity loan.

It’s important to be aware that the monthly management fee and interest fees are not capital repayments on your equity loan or your mortgage and so they do not reduce the amount of the loan and mortgage that you owe.

Mum with two kids on sofa with iPad

So, is it possible to buy a home with just a 5% deposit?

In effect, yes. You initially only need to save for a 5% deposit, and the Government may lend you another 20% (or 40% if you’re in London) to bring your total deposit up to 25% (or 45% in London) meaning that you then need to get a mortgage for 75% (or 55% in London). But be aware, the 20% Government loan is not free and you will need to pay interest on it from year 6 onwards.

Who is eligible for the Help to Buy Equity Loan?

Under the current equity loan scheme (running until the end of March 2021), equity loans are available to first time buyers as well as existing home owners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000.

You won’t be able to sublet this home or enter a part exchange deal on your old home. You must not own any other property at the time you buy your new home with a Help to Buy Equity Loan.

The maximum you can borrow from Help to Buy in England is £120,000 and up to £240,000 for London. There is no minimum amount.

Buyers cannot use the help to buy scheme if they require a main mortgage more than 4.5 times their household income.

After April 2021 until March 2023, the help to buy scheme will be limited to first time buyers and regional property price caps will be applied (see table further down).

Firstly you need to find a property that is available to buy with the Help to Buy scheme. These will be new-build homes only as the scheme is only available on brand new properties. That doesn’t mean that all new build properties under £600,000 can be bought with a Help to Buy equity loan. The developer has to apply for their property to be available under the scheme. Look for the Help to Buy logo on new developments to indicate that they have homes available under the scheme.

Register with your local Help to Buy Agent

Once you’ve found a home that you like that is available, you then need to get yourself registered with your local Help to Buy agent. These are agents who are appointment by the Government and it’s their job to administer the Help to Buy Equity Loan scheme on a day to day basis. There are three Help to Buy agents across England (the North; Midlands & London; and the South) and they will check that you can afford to buy the home that you want. You’ll need to get approval from them before you can go ahead and buy your home with the Help to Buy Equity Loan scheme. They support you with your application for an equity loan.

You then need to get a mortgage for the amount left after your deposit and the loan. This needs to be a specific Help to Buy mortgage and not all lenders offer them.

Girl putting money in a money box

You’ll need to take out a Help to Buy mortgage for the 75% that you'll need to complete your purchase. Not all lenders offer Help to Buy mortgages so you are best to take specialist independent financial advice about who offers these mortgages and which rates and offers are best for you (and the impact of COVID-19 may mean that some lenders are not offering the same mortgage products right now).

Changes to Help to Buy Equity Loans after April 2021

Currently the Help to Buy Equity Loan is available to both first time buyers and existing home owners who are looking to move, and is available on selected new-build properties up to the value of £600,000.

The new scheme is for first-time buyers only

But, be aware that from 1st April 2021 there are changes being made to the loans scheme which means that it will only be available to first-time buyers(defined as those who haven’t previously owned or purchased property), and that there will be the introduction of regional property price caps. This means that depending on where in the country you are buying there will be different maximum prices.

Regional Property Price Caps after April 2021

Can I put in more than a 5% deposit with Help to Buy?

Yes, 5% is the minimum amount of deposit that you need to have, but if you have managed to save more than this then that it allowed too.

Equally, you do not need to take the full 20% Equity Loan (or 40% in London) if you do not need to borrow that amount of money to top up your deposit.

You need to take out a mortgage for at least 25% of the value of the property, so if you wanted to you could put in a 40% deposit, take a 20% equity loan and then you would only need to take out a mortgage for 40%, but you should always seek independent financial advice to make sure that you are taking the option that works best for you both now and in the longer term.

How and when do I need to repay the Equity Loan?

For the first 5 years you do not have to repay any thing on the equity loan. After 5 years you will be charged interest on the loan. The interest is calculated at 1.75% in year 6, and then every year after that the interest goes up by the rate of inflation (Retail Prices Index or RPI) plus 1% each year (you can see the 

Here’s an example of what your interest payments on the loan might look like if inflation (RPI) was at 2% per year at you had taken an equity loan of £50,000 (20%of £250,000):

So from year 6 onwards you would need to budget for these interest payments on top of your mortgage repayments.

However, remember that you will not actually be paying off any of the loan at this stage, it is just the interest. You need to repay the full loan within 25 years or when you sell the property.

A lot of people may choose to pay the loan back sooner than this, either by saving up or by adding the value of the loan to their mortgage.

The amount of the loan you repay may not be the same as the amount you borrowed

Don’t forget that when it comes to paying back the loan, you are not repaying the amount you borrowed, but you are repaying the value that the equity share is now worth. So, if you borrowed 20% of a £250,000 property (i.e. a £50,000 loan) in 2013, but that same house is now worth £270,000, then you would need to pay back 20% of the current price (i.e.£54,000) on top of the interest that you would have been paying since year 6.

But, if house prices have fallen since you bought, then the value of the loan that you have to repay will also have gone down. So, if the £250,000 property is now worth £230,000 then you would have to repay 20% of £230,000 (i.e. £46,000).

The amount of interest that you repay is calculated on the value of the original loan amount and not the current market value of the equity, even if the price of your property has gone up or down since you originally bought it.

What other costs do you need to account for each month?

Someone adding up the cost of bills

Typically every month, you will need to make payments in addition to your normal monthly outgoings, including:

Initial monthly management fee of £1per month to be paid from the start of ownership until the loan is repaid

After five years, interest on the Help to Buy equity loan

Service charges, if you buy a house or flat with shared areas that require maintenance

Utility bills and other costs of occupying the property

There may be other costs that you have to pay depending on your personal circumstances.

This could be considered a great scheme as the Government gives you an equity loan that allows you to effective put down a cash deposit 25% (or 45% in London) to buy the new build home that you want.

In the first five years you do not have to pay back anything on the loan at all, so it’s a great scheme for people who want to get on the housing ladder, but have not been able to save up a big deposit. As long as you are able to cover the mortgage repayments for the first five years, and then the equity loan repayments on top of that after five years then this could be a scheme worth considering.

This is a good option for anyone who thinks that they will be in a position to remortgage after the first five years and effectively payback the loan with a new mortgage, but of course the mortgage payments may go up at that point instead.

Other things to consider with the Help to Buy Equity Loan scheme

The scheme only applies when buying a new build property

From year 6 onwards, you need to make an allowance in your budget for the interest on the equity loan. Initially, in year 6, the interest rate will be 1.75% of the initial loan amount. After then, the interest rate rises by inflation based on the Retail Prices Index (RPI) plus 1% each year. This is just the interest on the loan, you will not be paying off any of the loan itself

You can also pay back part or all of your loan at any time, but the minimum percentage you can pay back at any one time is 10% of the market value of your home. So if you bought your home for £250,000 with a 20% Equity Loan, and assuming your house has not gone up in value, then the minimum amount you will need to save to pay back some of your loan is £25,000 at any one time

The Government owns a stake in your home, and this means you could end up paying them back more than you borrowed. For example if you borrow £50,000 (20%) to buy a £250,000 property. If, by the time you want to pay the loan back or are coming to sell the property, your home is now worth £270,000 you would now have to pay back 20% of £270,000 = £54,000, a £4,000 increase compared to the amount of the original loan, and this is on top of the interest that you will have already paid

If you need a main mortgage that is more than 4.5 times your household income then you cannot use the Help to Buy equity loan scheme

Wayhome is the Gradual Homeownership option that helps aspiring homeowners take their first steps towards ownership without taking a mortgage. A simple, yet revolutionary idea: if you can afford to rent, you can afford to gradually buy. Start with as little as a 5% deposit, and pay rent on the part of the home that you don’t own. Buy more as and when you can afford to do so.

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Help to Buy is Ending: What are the alternatives in 2023?

Help to Buy Equity Loan: Everything you need to know