Getting a mortgage can seem difficult, particularly when it comes to saving up a big enough deposit and especially in the current climate. The good news is that the government offer a range of schemes designed to help people buy their first (or even next) home.
They range from offering specific loans to help with the deposit to shared arrangements to bring down monthly payments. So, whatever the obstacle is that’s standing in your way of homeownership, we can help you find the scheme that’s right for you.
What government schemes can help me get a mortgage?
There are mortgage schemes designed for both first-time buyers and homeowners. Here are some summaries of the current schemes available in the UK.
First Home scheme
This scheme is for first-time buyers wishing to buy a new-build home. It offers prospective homeowners a discount of 30% to 50% on the property and can be subject to local eligibility criteria from the council.
Who is eligible for the First Home scheme?
You can apply for the First Home scheme if:
- You’re a first-time buyer.
- You’re buying a new-build home that is valued at less than the regional price cap.
- You have an income below £80,000 if you live outside of London, or £90,000 if you live in London. This counts as both combined income if you’re applying with someone else, or sole income if you’re applying alone.
Help to Buy Equity Loan and the Help to Buy Mortgage Guarantee Scheme
Help to Buy: equity loan
There are two Help to Buy schemes for first-time buyers. The Help to Buy Equity Loan is currently only available in Wales until March 2025. It was designed for first-time buyers looking to buy a new-build property, helping them put down a bigger deposit.
How it works is that the applicant puts up at least 5% of the property’s value, and the government provides an equity loan of anything between 5% and 20% (40% in London). The loan is interest-free for the first five years.
Help to Buy: mortgage guarantee scheme
This scheme also has a time limit as it’s currently only available until June 2025. With the mortgage guarantee scheme, the government underwrites 15% of your mortgage as long as you can put down a 5% deposit. It means that the lender can offer more 95% LTV (loan-to-value) mortgages because it reduces some of the risk for them.
Who is eligible for the Help to Buy mortgage guarantee scheme?
You can apply for the mortgage guarantee scheme if:
- You’re a first-time buyer.
- You have a 5% deposit.
- The property you want to buy is residential and worth less than £600,000.
Help to Build equity loan scheme
This is a scheme designed for those with dreams of building their own home in England. It allows the applicant to take out an equity loan of between 5% and 20% from the government, which can be put towards the cost of the land and building of the property.
Who is eligible for the Help to Build equity loan?
You can apply for the Help to Build equity loan if:
- You plan to live in it once it’s built.
- You have approval for a self-build mortgage with a lender who is registered with the scheme.
- You plan to spend no more than £400,000 on construction and £600,000 in total.
Shared Ownership scheme
With a shared ownership mortgage, the buyer purchases a pre-agreed amount of the property using a mortgage from a developer or local authority. This is usually between 25% and 75% of the total value. Then they pay rent to a local housing association on the remaining amount.
This scheme was created for first-time buyers and buyers struggling to secure a mortgage.
Who is eligible for the Shared Ownership scheme?
You can apply for a shared ownership mortgage if:
- You’re a first-time buyer or a former homeowner.
- Your income is less than £80,000 or £90,000 if you live in London.
- You have a 5% deposit. However, some lenders will still consider you if you have no deposit at all.
Right to Buy scheme
Introduced in the 1980s, this scheme allows tenants to buy their council house or flat at a discounted rate and is currently available in England, Wales and Northern Ireland. The discount offered will depend on where you live and whether the council home you’re buying is a house or a flat.
Who is eligible for the Right to Buy scheme?
You’re eligible for Right to Buy if:
- You’re a council tenant and have rented for a minimum of 3 years.
- The property you want to buy is your main home or your only home.
- You live in England, Wales or Northern Ireland.
Lifetime Individual Savings Account (LISA)
The LISA is not actually a mortgage scheme, but rather a savings plan. So if you need a boost in saving up for a deposit, this might be helpful for you.
You can save up to £4,000 per year into your Lifetime Individual Savings Account, and the government will top it up by 25%. For first-time buyers, it’s an alternative to the Help to Buy ISA that ended in 2019.
Who is eligible for the Lifetime ISA?
You can apply for a LISA if:
- You’re aged between 18 and 39.
- You’re a UK resident.
Other things to consider for government mortgage schemes
For any government scheme that requires a mortgage, you’ll have mortgage lender eligibility criteria to meet alongside any criteria specific to the scheme.
Mortgage lenders assess your eligibility and affordability by looking a number of factors, these usually include:
Income and outgoings:
Mortgage providers usually lend 4 to 5 times your income. They also looking at your regular spending to make sure you’re living within your means and are responsible with your money.
Credit history
While having bad credit doesn’t necessarily hold you back from getting a mortgage or using a government scheme, a higher credit score will improve your chances of approval. It’ll also open you up to better rates.
Age
Some lenders have age limits on who they’ll lend to and these limits often sit at around 85. If you’re worried your age will prevent you from getting a mortgage, a broker can help you find a lender without an age limit in their eligibility criteria.
Property type
If the property you’ve got your eye on is known as non-standard (perhaps it’s above a shop or it has a thatched roof), you might need to find a specialist lender. A mortgage broker can help you find a lender who will give you a mortgage for a non-standard property.
The type of government mortgage scheme you should choose depends on your personal situation and eligibility. Aside from the eligibility requirements, make sure you think about what’s important to you, or what exactly you might need help with. Is it getting on the property ladder to begin with? Or perhaps it’s lower monthly repayments?
If you’re not sure, a mortgage broker can help you identify which scheme is best suited to you. At The Mortgage Hut, our specialist brokers have helped hundreds of homebuyers buy their dream home with the help of a government-backed scheme. Speak to a member of our team to see how we can help you.
FAQs
Are government mortgage schemes only for first time buyers?
No. While there are schemes designed specifically for first-time buyers, there are plenty of other schemes that were created to help house movers find their next home, too, like the mortgage guarantee scheme. A specialist mortgage broker can help you find one.
Are there any government mortgage schemes for buy-to-let mortgages?
No, there are no schemes currently aimed at buyers who want to purchase a property to let out.
How does the 5% scheme work?
Under the mortgage guarantee scheme, buyers can access 95% loan-to-value mortgages by putting down a 5% deposit.
