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Help to Buy in London

London’s property market presents unique challenges to those looking to buy their first home, with high house prices making it difficult for many would-be homebuyers to save the necessary deposit or meet mortgage lenders’ affordability criteria.

Help to Buy in London

In recent years it has become more difficult for first time buyers to get on the property ladder, and it has to be acknowledged that the situation for would-be buyers in London has become particularly problematic, with high house prices – and risk-averse mortgage lenders – often putting properties beyond the average first time buyer’s ability to afford.

That’s not to say that it’s all doom and gloom. As with any home-buying decision, it pays to take a step back and look realistically at your options. The first step is to understand the costs involved in buying and owning a property, and working out whether you can afford it. It also helps to know a bit about the various government-supported schemes that exist to help first time buyers in London who are looking to buy their first home.

Working out the costs

Your foremost consideration is likely to be the deposit. The days of 100 per cent mortgages are long gone, and the amount of deposit you’re able to put down will affect not only what properties you’ll be able to afford, but also what mortgage deals you will qualify for – as a rule of the thumb, the bigger the deposit the better the rate, and a deposit of around 40 per cent of the purchase price will open up a greater range of mortgages for you to choose from.

The current economic reality is that many first time buyers in London struggle to afford a large deposit percentage, particularly on London’s relatively high house prices. The good news is that mortgage options are still available to those with smaller deposits. The government’s Help to Buy schemes (see below) in particular have helped to open up more options to first time buyers in London.

Of course the deposit isn’t the only up-front expense you’ll have when buying your first home, and it’s important to be realistic about the costs. Mortgage arrangement fees, broker’s fees, conveyancing and valuation fees can all add up to hundreds or even thousands of pounds. There’s also Stamp Duty Land Tax to pay – although as of November 2017 first time buyers do not have to pay this on properties up to £300,000, and will get a discount on properties up to £500,000.

Compare the cost of conveyancing solicitors here

Help to Buy for a first time buyer in London

Mortgage Guarantee and Equity Loans

There are a number of government schemes intended to make it easier for UK homebuyers to get on or move up the property ladder, and these schemes are known collectively as “Help to Buy”. Together these schemes have helped thousands of first time buyers and home movers purchase a new home – in London too!

The Help to Buy Mortgage Guarantee, as of December 2016, is no longer available to those looking at getting a low-deposit mortgage, however alternative Help to Buy schemes have been extended until 2020 to help support homebuyers - such as the Help to Buy London equity loan. The Lifetime ISA and Help to Buy ISA are new government schemes that are also intended to help those that looking to save for a deposit on a house or a mortgage. 

If you want to see HM Treasury's guidelines for Conveyancers on the Help to Buy ISA, click here

Help to Buy London

Launched in February 2016, the Help to Buy London scheme is an extension of the existing Help to Buy Equity loan scheme that began in 2013.

The Help to Buy London scheme is an equity loan provided by the Government to support buyers of new-build homes costing up to £600,000 with an equity loan of up to 40%. The loan is interest free for the first five years and can be paid back at any point or when you put the property up for sale. First-time buyers in London will need a minimum deposit of 5% to secure a mortgage of up to 55%.

Who is eligible for the Help to Buy London scheme?

London Help to Buy equity loans are available to first time buyers and homeowners that are looking to move within the capital.

To apply for the Help to Buy London scheme you must:

  • Buy a property in Greater London for £600,000 or less

  • Have a 5% deposit

  • Purchase a new-build property

  • You must not own any other property at the time you buy your new home

Shared ownership

Shared ownership (part buy/part rent) schemes are also available through London housing associations. While these schemes have existed for a while and aren’t strictly part of Help to Buy, they are currently arranged via local Help to Buy agents. Special shared ownership schemes are also available for older people and those with disabilities.

Updated January 2017

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