Government mortgage schemes for first-time buyers

What is a government mortgage scheme?

Government mortgage schemes are designed to help make it easier and more affordable for people to buy a home by providing financial support.

These schemes are typically used to help first-time buyers and people with smaller deposits to get on or move up the housing ladder.

What government mortgage help is available for homebuyers in the UK?

You’ll find a range of mortgage schemes available that can help you to buy a home, these schemes include:

• Help to Buy: The mortgage guarantee scheme
• Help to Buy: Equity Loan
• Shared Ownership
• First Homes
• Right to Buy
• Forces Help to Buy

Each scheme is designed to suit different needs and situations, so read on to check which scheme is right for you.

Help to Buy: The mortgage guarantee scheme

This scheme has been designed to encourage lenders to offer more 95% Loan-to-Value (LTV) mortgages and help people struggling to save enough for a large deposit.

Available across the UK, this government initiative supports lenders that offer 95% LTV mortgages with a government-backed guarantee.

Under the mortgage guarantee scheme, buyers can borrow between 91% and 95% of the property’s value by providing a deposit of between 9% and 5%.

You can use this scheme whether you’re a first-time buyer or an existing homeowner wanting to move, and it’s available for UK properties with a value of £600,000 or less.

By encouraging more lenders to offer 95% LTV mortgages, this scheme gives people who can afford mortgage repayments but not larger deposits the chance to buy a new home.

It’s thought that existing homeowners with a lower level of equity in their property will benefit from this scheme, enabling them to move onto the next rung of the property ladder. This in turn will increase the number of properties available for first-time buyers.

Help to Buy: Equity Loan (2021 - 2023)

The Help to Buy: Equity Loan scheme is designed to help people in England who are struggling to get on the housing ladder.

How does the government’s Help to Buy mortgage equity scheme work?

Designed to be used for new-build properties in England, eligible first-time buyers can be given a loan worth up to 20% of the property’s value, and up to 40% for London properties. 

To qualify, you’ll need a deposit worth at least 5% of the property you’re planning to buy.

There are regional price caps on the homes you can buy with an equity loan, these vary from £186,100 in the North East to £600,000 in London.

Once you’ve combined your loan with your deposit, you’ll need to take out a mortgage for the remaining amount - this means you’ll be taking out two separate types of loan.

How much interest will I pay on my Help to Buy equity loan?

The Help to Buy equity loan is interest-free for the first five years. After this, you’ll be charged a monthly interest of 1.75%. The interest rate will rise in April each year at 2% above the rate of inflation.

You’ll need to have paid off your equity loan before you can reach the end of your mortgage term.

Help to Buy ISAs

This scheme ended in 2019, so it’s not possible to open a new Help to Buy ISA anymore, but if you already have an account you can continue to save into it.

Help to Buy ISAs were designed to help people save for a mortgage deposit. With this scheme you can save up to £2,400 a year tax-free, but the government will also top up any contributions by 25%, up to a limit of £12,000.

For people wanting to open new savings accounts for home deposits, the government’s Lifetime ISAs may be an option.

Shared ownership

The government’s shared ownership scheme helps people in England who can’t afford to buy 100% of a home by enabling them to buy a share of their home instead.

How does shared ownership work?

With this scheme, you can buy a share of a home from a housing association, this can be either a newly built home or an existing one.

Through shared ownership, you can buy between 10% and 75% of the home’s value and then pay rent on the rest. It’s possible to buy a bigger share later on, up to 100% of the property’s value, when you can afford to.

The rent you’ll pay to the housing association will be charged at a discounted rate, which makes it cheaper than a typical private rental.

When you take out Shared Ownership, you’ll be given a ten year repair period which will provide you with support from your housing association landlord to pay for essential repairs.

It's worth noting that shared ownership properties are always leasehold.

Who can get a shared ownership mortgage?

To apply for a shared ownership mortgage you’ll need to meet certain eligibility criteria, this includes:

• Your household earnings should be £80,000 a year or less (£90,000 in London)
• You can’t afford all of the deposit and mortgage repayments for the type of home you need
• You’re a first-time buyer, a previous homeowner, or a current shared homeowner, who can’t afford to buy a new home to suit your needs

There are different rules for shared ownership in Scotland, Wales and Northern Ireland

How is Help to Buy different around the UK?

While similar schemes are available in Scotland and Wales, there are some variations:

Help to Buy Scotland

There are two government schemes in Scotland: The Affordable New Build scheme, which closed to new applications in February 2021, helped first-time buyers and existing homeowners with up to 15% of the cost of a new build home. 

The Smaller Developers New Build scheme, available until the end of the financial year 2021 to 2022, works in a similar way - helping eligible people to buy a new build home from smaller homebuilder firms by providing an equity loan of up to 15%. 

In Scotland, there are also shared ownership schemes that are run by housing associations. Eligibility criteria differs between associations, so you’ll need to check with the local council or housing association in your area to find out about the schemes near you. 

Help to Buy Wales

In Wales, there are three schemes available, each aimed at people in different situations:

The Shared ownership - Wales scheme helps people who can’t afford to buy 100% of a home. Instead, they can buy between 25% and 75% of a housing association property, and pay rent on the remaining share. People can increase their share of the property at any time.

For people who have a 5% deposit, Help to Buy - Wales helps them buy a new build home by providing an equity loan of up to 20% of the property’s price. The loan needs to be repaid when the repayment mortgage is paid off, the property is sold or at the end of the loan term. 

The Homebuy - Wales scheme is only available in certain areas, particularly rural locations where there might be fewer opportunities to buy a home. It helps households to buy a home by providing an equity loan of up to 30%, with up to 50% possible in certain circumstances.

Is Help to buy available in Northern Ireland?

No, Help to Buy isn’t available in Northern Ireland, but there are other low-cost home ownership schemes here to help people get on the property ladder:

The House Sales Scheme, which closes in August 2022, gives social housing tenants the right to buy their homes at a discount. The discounts can be from 20% (if they’ve been a tenant for a minimum of five years) up to a maximum of 60% or £24,000, whichever is lower.

Equity sharing is part of the House Sales Scheme and allows people who can’t afford to buy the entire property to apply to buy what they can afford. People must buy at least 25% equity to be part of the scheme, but they can increase their share at any time. 

The Co-ownership scheme allows people to buy a share of a property and rent the rest from Co-Ownership, a registered housing association. People can buy between 50% and 90% of the property, so they pay a smaller mortgage plus a lower rate of rent on the other share.

What other schemes are available to help people buy their own homes?

As well as the Help to Buy schemes, there are a number of other routes the government is providing to help make it easier for people to become homeowners:

Lifetime ISA

Lifetime ISAs (also known as LISAs) are a type of long-term tax-free savings account to help younger people save for their first home or save for later life.

To take out a LISA you must be aged 18 or over, but under 40. You can pay in up to £4,000 a year until you’re 50 years old and the government will add a 25% bonus of up to £1,000 every tax year. 

You can take out money from your LISA if you’re buying your first home, you’re aged 60 or over, or you’re terminally ill with less than 12 months to live.

First Homes

This is a new scheme designed to help local first-time buyers and key workers in England to get onto the property ladder. 

Offering new home discounts of 30% compared to market prices, with some areas discounted as high as 50%, these discounts will apply to the home forever so new buyers and the local community can benefit every time the property is sold.

Help to Build

To make building your own home more affordable, in 2021 the government announced their plans of a £150m ‘Help to Build’ scheme. 

Yet to be fully launched, this scheme is intended to work in a similar way to the Help to Buy scheme - by providing an equity loan so people can benefit from lower deposit mortgages.

Right to Buy

If you’ve been a council or housing association tenant in England for three years, the Right to Buy scheme can help you buy your home by providing you with a discount of up to £84,600 (£112,800 if you live in London).

Right to Buy: Preserved Right to Buy

If you were a secure council tenant and while you were living in your home it was transferred from the council to another landlord, like a housing association, this scheme can help you to buy your home by applying the same discounts as Right to Buy.

Forces Help to Buy

If you’re a regular serviceman or servicewoman in the armed forces, this scheme can help you to borrow up to 50% of your salary interest-free, to a maximum of £25,000. 

This loan can be used for buying a first home or moving to a new home when you’re on assignment or as your family’s needs change.

HOLD or Home Ownership for people with Long term Disabilities

This scheme applies if you live in England and have a long-term disability. It can help you buy a home to suit your needs (like a ground floor flat) on a shared basis, by being able to buy a share of between 10% and 75% of the home’s value and paying rent on the rest.

Scotland: Low-cost Initiative for First-Time Buyers (LIFT)

There are two LIFT schemes in Scotland, the Open Market Shared Equity scheme, which helps people who can’t afford the full price of a home, and the New Supply Shared Equity scheme which helps people buy a new build home from the council or housing association. 

What else affects eligibility for a mortgage through a government help programme?

Depending on the scheme you use, typically to qualify for a mortgage you’ll need to be:

• A first-time buyer or moving into a new home that you can’t afford without the scheme
• 18 years old or older
• Planning to put down a deposit of at least 5% (unless you’re using a shared ownership scheme where you don’t need a deposit)
• Borrowing less than £570,000
• Not using any form of sharia mortgage finance
• Wanting a repayment mortgage, not interest-only
• Planning to live in the property and not rent out any part of it
• Living permanently in the UK

Have any new government mortgage programmes been announced recently?

Both the Help to Buy mortgage guarantee scheme and Help to Buy equity loan were announced in April 2021. These are designed to help increase the supply of 5% deposit mortgages for borrowers and provide first-time buyers with loans towards new build homes.

The first properties for the First Homes scheme went on the market in June 2021 in the East Midlands, and further sites are set to launch across the country from Autumn 2021.

Also recently announced, The Affordable Homes Programme 2021-2026 will be offering a new model for shared ownership in England to be available in 2022. This new model will include reducing the initial stake from 25% to 10% and introducing a ten-year repair period.

Can I get government support if I can’t pay my mortgage?

If you’re struggling to meet your mortgage repayments there may be government support that could help - what’s available will depend on your circumstances and where you live.

In Wales, some local authorities and housing associations offer mortgage rescue schemes to help homeowners avoid repossession, if it’s likely that without the help of the scheme the homeowner will become homeless.

In Scotland, the Scottish Government’s Home Owners’ Support Fund may be able to help. This works by either the government buying a stake in your property to reduce your loan, or your social landlord buying your home so that you can continue living there as a tenant.

Can the government help with mortgage interest?

If you’re a homeowner, the government’s Support for Mortgage Interest may be able to help. This can provide eligible homeowners (those already receiving government benefits) with a loan to help pay mortgage interest payments. 

Although interest will be charged on the loan, it may be cheaper than other ways of borrowing money.

Can I get government help with my mortgage if I’m on Universal Credit?

Yes, you can, but only if you’ve been claiming Universal Credit for 39 weeks or more, without having any breaks or earning any money in that time.

Where to get mortgage help from the UK government

To find out more about the government mortgage schemes that might be able to help you buy a home, you can visit: Own Your Home.

Or you can take a look at the regional information available for your area:

Wales

Scotland

Northern Ireland

Check out our Mortgage Calculator to see how much you can borrow.