Which Government Mortgage Schemes Can I Apply For?

Question

How Do Help to Buy Mortgages Work?

Accepted Answer

The Help to Buy scheme has been extended to 2023, although some regions have price caps implemented from 2021 onwards. Applicants can borrow 20% of the property value, with zero interest payable for five years, with a minimum 5% deposit required.

That means needing to apply for a smaller mortgage and having a substantial deposit to make it easier to get onto the property ladder, with better interest rates available.

Criteria include:

Buying a first property that will be your primary residence.
Taking out a repayment mortgage.
Staying beneath the pricing caps, usually £600,000 but depending on the region.

What are the Interest Rates on Help to Buy Equity Loans?

The loan is interest-free for the first five years. In year six, the interest is 1.75% of the value and increases every year after that.

Interest is calculated against the Retail Prices Index, plus 1% a year. When the property is sold, or the mortgage repaid, the equity loan remains repayable based on the percentage stake at its current market value.

How is Help to Buy Different In the UK Regions?

The scheme works a little differently depending on what area you live in.

Help to Buy Scotland comprises two programmes, the Affordable New Build Scheme and the Smaller Developers Scheme.
The interest-free equity loan is available up to 15% of the property value, with the same minimum 5% deposit.
Applicants cannot already own property unless that home is sold in advance of completing the new purchase.
Properties are capped at £200,000 and are available only from participating developers.

In Wales, the system is more similar to England. The same 20% equity loan is available with a 5% deposit and five years interest-free. Properties are capped at £300,000.

Northern Ireland doesn't have a Help to Buy scheme but does have other options such as purchasing discounted properties from the Housing Executive.

What are the Criteria to Apply for a Shared Ownership Mortgage?

Shared Ownership is a way to purchase a property proportion if you don't have the funds to buy a home outright.

Applicants must earn under £80,000 a year per household and under £90,000 in London.
Only first-time buyers or applicants who have owned a property before but cannot afford the mortgage can apply.
Most applicants require a 5% deposit, although this is not always required.
The landlord has the first refusal if you sell the property within 21 years from purchasing 100% of the property.

How is Eligibility Checked for Government Mortgage Schemes?

Each scheme is different, but all will look at the below eligibility factors:

Your employment status and earnings. Most schemes are aimed at low-income applicants, and mortgages are usually capped at 4.5 to five times your annual income.
Credit rating - with specialist lenders usually required if you have adverse credit issues.
Age limits, with caps of around 75 or 85 as a maximum with some mainstream lenders.
The property you wish to buy. Non-standard properties can be considered a higher risk and may need a niche mortgage provider.
Your deposit, with 5% being the minimum with many of the government mortgage schemes.

Are There Any New Government Mortgage Support Programmes?

There aren't any new programmes, but updates have been released to the Help to Buy scheme. This has been extended to 2023.

Equity loans are capped depending on the region, as below:

North East England £186,100
North West England £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 England £437,600
South West England £349,000

Are There Government Support Schemes if I Cannot Keep up with my Mortgage?

Potentially, yes. The Mortgage Rescue Scheme is an option in Wales, although this has been discontinued in England.

Welsh property owners can apply to their local council, often referred by the housing association. They will either purchase a proportion of the property or buy the home and allow you to rent it back at an affordable rate.

In Scotland, homeowners can apply to the Home Owners Support Fund. There are two financial assistance schemes:

Mortgage Rent Scheme, where a social landlord buys the property and rents it back to you.
Mortgaged to Shared Equity Scheme, where the government purchases up to 30% of the home from you, to reduce your monthly outgoings.

You can also apply to the Support for Mortgage Interest scheme. This offers a repayable loan secured against your property, designed for people who are struggling to keep up with the interest payments on their mortgage.

Can I Get Help with Mortgage Costs as a Benefits Recipient?

Potentially, yes, provided you aren’t on employer benefits such as Statutory Sick Pay.

Usually, if you are on benefits, the government will pay some of your mortgage interest costs directly to the lender, depending on the balance on your mortgage account.

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