...

★★★★★

Rated Excellent

UK Property Finance

★★★★★

Rated Excellent

open 7 days

★★★★★

Rated Excellent

open 7 days

Help To Buy vs Right To Buy

by | Oct 21, 2019 | Mortgages

Through experience, we’ve found that a lot of would-be homeowners in the UK confuse the government’s Right to Buy scheme with severable separate affordable homeownership programmes.

 ‘Help to Buy’ in particular is often mistaken for the same basic scheme as ‘Right to Buy’, though there are significant differences between the two.

Help to buy

Introduced in 2013, the government’s Help to Buy programme was created to help struggling buyers purchase properties without the need to provide an excessive down payment. Whereas banks and major lenders typically request deposits of between 10% and 20%, Help to Buy reduces initial deposit requirements to just 5%.

The property being purchased must have a market value of less than £600,000 and be the intended primary residence of the buyer, should the purchase go ahead.

Qualifying applicants are required to offer a deposit of 5%, after which the government provides an equity loan up to a maximum of 20% (or 40% in London) of the market value of the property. This boosts the down payment the buyer is able to provide, opening the door to more competitive mortgage rates and lower borrowing costs with leading lenders.

Contrary to popular belief, these equity loans are available to first-time buyers and existing homeowners looking to relocate. However, the scheme covers new-build properties only, not resale homes of any kind.

The government-issued equity loan is provided for an initial five-year period at 0% interest, after which an interest rate of 1.75% is payable during the six-year period, increasing by 1% every year after the loan balance remains unpaid.

The Help to Buy scheme is therefore designed to improve accessibility and initial affordability for homebuyers, though it doesn’t offer any direct incentives regarding the price of the property. The market value of the property is the price payable, and the equity loan provided by the government must be repaid in full.

Right to buy

By contrast, the government’s ‘Right to Buy’ scheme opens the door to potentially huge discounts for qualifying tenants. In this instance, the scheme is available exclusively for tenants of council properties who must have lived in a council home for a minimum of three years (previously five years).

Tenants who qualify under the Right to Buy scheme may be offered as much as 70% off the market value of their property. The maximum discounts currently available are set at £70,600 across most of England and £104,900 in London. The size of the discount depends on several factors, including the value of the property, the type of property they live in, and how long the tenant has lived there.

While the Right to Buy scheme doesn’t offer any direct assistance regarding mortgage eligibility, qualifying applicants can use the discounts offered instead of down payments. This means that while it is still necessary to apply for a mortgage via the usual channels, it may not be necessary to come up with any deposit whatsoever.

The government recently announced plans to extend the right to buy to tenants of housing association properties, though no specific dates for the new legislation have yet been confirmed.

Ask the experts…

If you’re interested in taking advantage of any government-issued home purchase scheme, it’s important to carefully consider all available options. Independent advice and support should be sought at the earliest possible stage in order to ensure you fully understand your position and your eligibility, should you go ahead.

For more information on any aspect of Right to Buy or Help to Buy, book your obligation-free consultation with a member of our team today. Work out the costs of a mortgage using our UK mortgage calculator.

Recent Posts

Financing Co-Living Spaces: The Next Frontier for UK Property Investors

The UK’s urban landscape is evolving, with young professionals, digital nomads, and transient workers seeking flexible, community-driven living solutions. Co-living, shared accommodation blending private bedrooms with communal spaces like kitchens, coworking areas,...

How Landlords Can Expand Their Portfolios Using Bridging Loans

For landlords looking to grow their property portfolios, bridging loans can be a powerful financial tool. These short-term loans provide quick access to capital, enabling landlords to seize time-sensitive opportunities in the UK property market. This blog post...

Are Bridging Loans Available to Businesses?

For businesses facing cash flow challenges or time-sensitive opportunities, bridging loans can be a game-changer. Property investors and businesses across various industries are increasingly using these short-term, flexible financing options. Can businesses access...

Right-to-Buy Mortgages: Turning Your Council Home Into Your Own

For many council tenants in England, the dream of owning their home is closer than they might think, thanks to the Right-to-Buy scheme. Introduced in the 1980s under the Housing Act, this government initiative allows eligible tenants to purchase their council home at...

Owner-Occupied vs. Investment Properties: Choosing the Right Commercial Finance Option

Are you a business owner looking to purchase commercial property in the UK? Whether you’re planning to occupy the space yourself or invest in a property for rental income, choosing the right financing option is crucial. In this blog post, we’ll explore the key...

Residential vs. Commercial Mortgages: Key Differences Every Borrower Should Know

When it comes to financing property in the UK, whether you’re purchasing your dream home or investing in a business premises, the type of mortgage you get will shape your financial commitments for years to come. In this blog post, we’ll compare residential and...

Using a Secured Loan to Raise a Deposit for Your Next Property Purchase

Purchasing a new property can be an exciting milestone, but one of the biggest hurdles is often coming up with a sufficient deposit. For many, a secured loan offers a viable route to bridge that gap. In this post, we will explore how secured loans work, the benefits...

Understanding Interest Rates and Loan Terms Through Calculators

Navigating the world of loans in the UK can feel overwhelming, especially when faced with various finance options and complex interest calculations. Fortunately, loan calculators are available for different options such as secured loans, bridging loans, development...

Key Housing Market Predictions for 2025

As we step into 2025, the UK housing market is poised for notable changes, particularly concerning mortgage rates. Recent analysis suggests a favourable shift for prospective homeowners and investors. Projected decline in mortgage rates The consumer body Which?...

How a Secured Loan Calculator Can Help You Make Smarter Financial Decisions

When contemplating a secured loan, the financial risks can be significant. Whether you're planning a home renovation, consolidating debt, or purchasing a vehicle, understanding your borrowing power and repayment terms is crucial. A secured loan calculator is a...

Categories