Help To Buy alternative options for First Time Buyers

What is the Help to Buy scheme?

The Help to Buy scheme was a government initative that helped first-time buyers to buy their first home with just a 5% deposit. It worked by the government providing an equity loan equivalent to 20% of the purchase price (40% in London), which was interest-free for the first five years. This means as the buyer, you only had to put down a deposit equivalent to 5% of the purchase price, then get a mortgage to cover the remaining 75%.

What is the Help to Buy ISA?

The Help to Buy ISA was a special savings account designed to help first-time buyers save up a house deposit faster. You could save up to £200 per month, and the government would top up your savings by 25% (up to £3,000 in total). If you already have a Help to Buy ISA, you can continue to pay into the ISA until November 2029, but must use it to purchase a home by November 2030. The Help to Buy ISA is now closed to new customers - so unless you already have one, your only option is to open a Lifetime ISA.

You might like: How to transfer a Help to Buy ISA to a Lifetime ISA

Learn more: Help to Buy ISA vs Lifetime ISA

When did Help to Buy end?

Both the Help to Buy equity loan and the Help to Buy ISA are no longer available for new customers. The Help to Buy equity loan started in 2013, but closed for new customers in October 2022 and ended for all customers on the 31st March 2023. While the Help to Buy ISA was introduced in December 2015, and closed to new applicants on 30th November 2019. This means you can no longer use the Help to Buy equity loan, and if you don't already have a Help to Buy ISA already you won’t be eligible for this either.

Why did Help to Buy end?

The government hasn’t explained exactly why the Help to Buy equity loan and ISA ended. Currently, there are no plans for the government to introduce any new schemes to replace the Help to Buy equity loan - however a Lifetime ISA is a viable alternative to the Help to Buy ISA.

The scheme to make it easier for people to buy new-build homes with a small deposit. Although many new-build homeowners are grateful for Help to Buy, the scheme has also come under scrutiny. A House of Lords report said it has caused house prices to rise by more than the loan was worth to buyers, meaning that wasn't always good value for money.

Since Help to Buy could only be used on new build properties, this also caused problems. New builds can quickly lose their value, meaning that many first-time buyers are at a disadvantage when they’re ready to sell. If they sell the home for less than they bought it for, this can make it difficult to pay the government back. New builds are often priced 10-20% more than a second-hand property.

Read more: New build vs existing home: Which should you choose?

Will Help to Buy come back in 2024?

There has been speculation that Rishi Sunak is considering reinstating the Help to Buy equity loan scheme as part of the Conservatives' housing policy ahead of the 2024 UK general election. The new version of the Help to Buy scheme could be re-introduced without the previous new-build-only rule, a price cap that better reflects current house prices, or even a fixed repayment to prevent homeowners from ending up with a rising loan to pay back. Or it could come back as the exact same format as before, or not come back at all.

Read more: UK general election 2024 & housing: what to expect

What replaced Help to Buy?

The government introduced the Lifetime ISA in 2017 as an alternative to the old Help to Buy ISA. Although they haven't announced any plans to replace Help to Buy equity loan with a new scheme (yet), there are plenty of private alternatives to Help to Buy including no deposit mortgages, guarantor mortgages and shared ownership schemes. 

Learn more: What is a Lifetime ISA?

Other Help to Buy alternatives:

1. Deposit Unlock

Like the Help to Buy scheme, Deposit Unlock lets you buy a new build home with a 5% deposit. Most lenders typically require a deposit of 15-20% when lending on a new home because they’re concerned that the property’s value will fall once the borrower has moved in.

This is known as the ‘new build premium’ and it’s a bit like buying a new car. As soon as the keys are in your hand and you’ve taken it for a spin, it’s lost its newness ​​— just one of the things that contributed towards its price in the first place. 

But unlike new cars, the value of a new home usually recovers over time and they go on to appreciate in value just like other types of property. Nevertheless, this temporary fall in value can make it hard to find a lender who’ll let you buy a new build with a 5% deposit. 

Enter: Deposit Unlock.

If you buy a home through the Deposit Unlock scheme, your house builder will insure the mortgage. This gives participating lenders the confidence to offer 95% mortgages because they won’t lose any money if the property needs to be sold for less than its original value.

2. Professional Mortgage

A professional mortgage also lets you borrow up to 5.5 or even 6 times your salary for a mortgage, plus the minimum deposit required is 5% if you’re purchasing a pre-owned property. This means not only could you boost your borrowing potential, you can also buy without needing a 10%, 15% or even 20% deposit saved up.

However, to be eligible for a professional mortgage, you’ll need to have a ‘professional’ job. What counts as professional varies from one lender to the next, but lenders tend to include doctors, nurses, vets, lawyers and accountants. If you do fit the bill, you’ll need to have qualified in the last ten years, be registered with the appropriate UK professional body and have a good credit score.

3. 5.5x Income Mortgage

Another way to boost what you can borrow for a mortgage is through a 5.5x Income Mortgage. If you earn over £37,000 as a solo applicant, or £55,000 as a couple you could qualify to borrow up to 5.5x your household income. Plus, this scheme has a minimum deposit requirement of 5% - so you can enhance your borrowing and get on the ladder with a small deposit saved up.

4. Armed Forces Help to Buy

If you’re in the British Army, Royal Navy, or Royal Air Force, you could boost your home buying budget with the help of an interest-free loan from the government. 

The Armed Forces Help to Buy scheme lets you borrow 50% of your annual salary, up to a maximum of £25,000. You can put this money towards your house deposit, solicitor/estate agent fees or in some cases property renovations.

5. Deposit Boost

It can be hard to save a deposit while renting, so it’s no surprise that many renters believe home ownership is out of their reach. If you're struggling to save enough money for a deposit And you have a friend or family member willing to help you financially, a Deposit Boost might be right for you.

Let's imagine your Mum wants to help you buy a house but she doesn’t have thousands of pounds sitting in her bank account. It may be possible for her to remortgage her property so that some of the equity can be used for your deposit. 

Unlike traditional guarantor mortgages, a Deposit Boost doesn’t connect the buyer to the Booster financially. This means that if you were to default on your mortgage payments, your Mum (or whoever it is that helps you) wouldn’t be legally expected to intervene. 

That’s because a Deposit Boost requires two different mortgages. The remortgage to release equity and a separate mortgage on the buyer’s home. 

6. Deposit Loan

Like a Deposit Boost, a Deposit Loan also lets you increase your down payment with the help of a loved one. But instead of them giving you the money as a gift, they give it in exchange for a share in your property. 

There are two ways to do this:

1. Your loved one gives you an equity loan and in return they own a percentage of your property
2. Your loved one offers you an interest-free loan that’s repaid when the property is sold

You and the person lending you the money will be co-owners but you’ll each have an individual share of the property. The size of your share will depend on your deposit, monthly payments and any changes in the property’s value.

7. Income Boost

An Income Boost is a type of joint borrower sole proprietor mortgage. It lets buyers increase the amount they can borrow by adding a friend or family member’s income to their mortgage application. 

Since most lenders only offer mortgages between 4-5 times an applicant’s salary, it can be hard to get a mortgage if you’re single, a student, or you don’t earn enough to buy a house in your area. 

If you earn £30,000 a year, for example, and the bank is willing to multiply your income by 4, you could borrow up to £120,000. If you’ve got a £20,000 deposit, this gives you a total budget of £140,000. Depending on where you want to buy, that might not be enough.

This is where an Income Boost comes in useful. If your Dad earns £40,000 and is willing to act as your Booster, you can combine your incomes together to borrow more money. 

So, if we take both your incomes (£70,000) and multiply that by 4, this gives us a mortgage of £280,000. Add your £20,000 deposit and you could buy a house worth £300,000.

If that’s still not enough to buy the house you want, you could potentially add another eligible Booster to the mortgage to enhance your borrowing.

Although your Boosters will be jointly responsible for the mortgage payments, they won’t own a share of the property itself. It’ll be all yours. 

8. Dynamic Ownership

Dynamic Ownership lets you buy a property with up to five others and track your individual contributions through a home agreement. It’s ideal if you have friends or siblings who’d also like to buy a house and you’re happy to live together under one roof. By clubbing together with your pals, you can increase your mortgage affordability and buy a bigger or better home. 

You won’t need to worry about who’s paying their fair share because each owner’s equity is separate and tracked. This means that when the property is sold, the amount you make from the sale will reflect how much you contributed to the deposit and mortgage payments. 

Learn more: How much house can I afford? 

9. Savings as Security

A Savings as Security or family springboard mortgage is another family-friendly alternative to Help to Buy. But instead of using their income or home to help you on the ladder, your helper uses their savings as a security instead.

Your family member will need to put a percentage of the property’s value into a designated savings account with the lender, usually 10%. The money will be used to offset the mortgage and, as long as you make the necessary repayments each month, they’ll get the money back after an agreed time frame. 

Your loved one’s savings will also earn interest while it’s in the savings account, so unless you default on your mortgage, your family member will get back what they put in plus any accrued interest.

10. Shared Ownership

Shared Ownership is a popular option for people who can’t afford the home they want. Rather than using a mortgage to buy the whole house, you buy a share of the property and pay rent on the rest. Usually, you’ll buy a share between 10-75% of the home’s full market value. 

The remainder of the property will be owned by a housing association, local council or private provider. They’ll be classed as your ‘landlord’ and you’ll pay them rent each month. Over time, you can ‘staircase’ your way to full property ownership by purchasing more of the property.