Government Schemes To Help Get a Mortgage Deposit

Help to Buy: Equity Loan: There are a number of options that fall under the Help to Buy umbrella, and the equity loan is one of them. It tops up a first-time buyer’s deposit for a new build property, totalling 25% (40% if in London). So, if you have 5% saved, the government will loan you 20%; if you have 15% saved, it will give you 10%. You then pay back the loan without interest for the first five years before the rate increases to 1.75%.

Eligibility: First-time buyers purchasing a new build property from a registered Help to Buy builder. The property must be valued within regional property caps and cannot be rented out.

Help to Buy ISA: This savings scheme was designed to help first-time buyers increase their deposits. Whilst Help to Buy ISA accounts can no longer be opened, those who had them before 2019 can still expect the government to add 25% of whatever is saved in that account once they purchase a property. The caveat is that the payment doesn’t come through until the sale has been completed, and the maximum amount given is £3,000. If buying a property with someone and each has an account, both contributions can be combined to boost the deposit.

Eligibility: First-time buyers who have an existing Help to Buy ISA.

Shared Ownership: This scheme allows buyers to purchase between a 25% and 75% share of a property rather than the whole property, which means you’d need a much smaller deposit. While having at least 5% of the share as a deposit is usually a stipulation, some lenders accept no deposit at all. The applicant would then pay rent on the portion they don’t own and can increase the percentage of ownership over time.

Eligibility: Those earning under £80,000 (or £90,000 if based in London).

Government Starter Homes Scheme: Also known as the First Homes scheme, this scheme takes between 30% and 50% off the price of a new-build home as long as it is valued below £250,000 (outside of London). The discount size depends on the property’s location and is agreed upon by a developer. The reduced price lowers the deposit needed.

Eligibility: First-time buyers between the ages of 23 and 40.

Lifetime ISA: Similar to the Help to Buy ISA, this is a savings account that the government will supplement with 25% of the amount saved if it is used to buy a property.

Eligibility: Those aged 18 to 40.

Right to Buy: If you live in a property owned by your local council, this scheme allows you to buy that property at a reduced rate. The discount can be up to 70% but will depend on numerous factors, including how long you’ve lived in the property, its type and its value. The discount lowers the size of the deposit needed, but it can also be used as the deposit itself.

Eligibility: A secure council tenant who has lived in a property owned by the public sector for over 3 years. This does not have to be 3 consecutive years.

Take a look at our calculator below to see how this may work out for you:

Developer-gifted deposits: Getting a discount on a new-build property from a developer is quite a common incentive, and the discount can then be used in place of a deposit. Alternatively, a developer might offer to match the deposit you put down, doubling your down payment. It’s best to talk each of these options through with a broker, though, as some lenders view these arrangements less favourably.

Bank schemes: “Lend a Hand” and the “Family Springboard” scheme are two initiatives certain mortgage providers have launched as a way of further supporting potential homeowners who lack that upfront investment. Both enable family members to contribute to the purchase by putting their savings into a certain account for a period of at least three years. The buyer themselves is usually required to have at least 5% saved, and the family member’s savings are only secure if repayments are met.

Guarantor mortgage: This is where a willing friend or relative offers up their savings or property as a deposit instead. This generous person would need to either own property themselves or be able to prove that they have enough capital to afford this. Lenders have their strict criteria as to who can qualify as a guarantor, so it’s worth running your potential guarantor by a broker first.