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Understanding Borrowing Limits on the Help to Buy Scheme

Help to Buy is a scheme that has helped thousands buy their home with a boosted deposit and lower interest rates. Here we unpick the borrowing limits and how that impacts your choice of residential property.

Understanding Borrowing Limits on the Help to Buy Scheme

The Help to Buy scheme helps many people get onto the property ladder, and find affordable mortgage borrowing.

However, before you start making applications and looking for a property, you need to know what you can borrow, the caps on property values, and how much you can apply for as an equity loan.

The Revolution Brokers team has created this guide to explain all the limits you should be aware of. For more help with securing competitive Help to Buy lending, give us a call on 0330 304 3040, or email the team at [email protected].

What is the Maximum I Can Borrow Through Help to Buy?

There are a few limits to be aware of:

  • The equity loan can be up to 20% of the value of the property.
  • You must contribute at least a 5% deposit.
  • The mortgage element needs to be for at least 25% of the purchase price.
  • Your deposit contribution and the mortgage together must be at least 80%.

In London, the limits are slightly different:

  • You can borrow up to 40% through the equity loan.
  • The mortgage still needs to be for at least 25%.
  • Your mortgage and deposit together need to be at least 60%.
  • The maximum property value is £600,000.

The maximum Help to Buy loan value is £120,000 in England and Wales, with a higher cap of £240,000 in London.

As an illustration:

  • You are buying a property worth £200,000 and have a 5% deposit.
  • You borrow £40,000 as an equity loan.
  • The cash deposit is £10,000.
  • The balance of £150,000 is funded through a mortgage.
About Your Mortgage
Single or joint mortgage?
What’s your yearly income?

Error: Yearly income income must be between £1 and £10,000,000.

Do you receive a regular bonus?

Error: Regular bonus must be between £1 and £10,000,000.

Based On Your Yearly Income, You May Be Able To Borrow

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

Do Limits Apply to a Remortgage on a Help to Buy Mortgage?

If you decide to refinance, the maximum you can borrow is calculated on the usual affordability calculations used for any mortgage.

The only variable is that your equity loan balance will carry over unless you remortgage and raise capital to repay the loan.

How do Lenders Calculate Affordability on Help to Buy?

Lenders will need you to have a 5% deposit to apply for a Help to Buy mortgage - although you can contribute up to 65% of the property value, with a 10% Help to Buy loan and the minimum mortgage value of 25%.

Your application will include information about the property you want to buy, what deposit you have available, and how much you can earn.

Typically, lenders can offer up to 4.5 times your annual income, and your expenses need to be within 45% of your monthly disposable income.

What are the Repayment Terms on a Help to Buy Mortgage?

The loan element is interest-free for five years but carries a £1 monthly nominal fee payable to Homes England.

After five years, you are charged interest at 1.75% in year six, which increases each year in line with the Retail Price Index, plus an additional 1%.

You must repay a Help to Buy loan within 25 years, or whenever you sell the property.

It is essential to note that, whatever proportion of your property is funded through an equity loan, you will need to pay back this same proportion when you repay, calculated against the current market value of your home.

Expert Advice on UK Help to Buy Borrowing

Not sure whether Help to Buy is your best bet - or uncertain whether a property you'd like to purchase falls within the borrowing limits?

Give mortgage advisors a call on 0330 304 3040, or email us at [email protected] and we'll get the ball rolling!

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