The initial launch of Help to Buy offered two schemes; an Equity loan, as outlined by the diagram below and a Mortgage guarantee scheme which has encouraged more lenders to offer high loan to value mortgages at competitive rates. From February 2016 the equity loan scheme has been widened to include a Help to Buy London proposition

Equity loan Help to Buy London
Type of property New builds only New builds only
Maximum home purchase 600,000 600,000
Minimum deposit 5% 5%
Maximum deposit n/a n/a
Equity loan from Government up to 20% of property value up to 40% of property value
Scheme fees up to 1.75% of loan value in sixth year.
Then RPI + 1% per annum
up to 1 a month in the first 5 years.
1.75% of loan value in sixth year
Then RPI + 1% per annum
Mortgage required up to 75% of property value up to 55% of property value
For first time buyers? Yes Yes
For existing homeowners? Yes Yes
For investment properties? No No
For buy-to-let homes? No No
For buy-to-let homes? No No
For repayment mortgages? Yes Yes
Available from 1st April 2013 1st February 2016
Available to 2020 TBC

* The government will guarantee part of the repayment of the mortgage to the lender, therefore increasing the availability of mortgages at competitive interest rates.

Scheme 1: Help to Buy equity loan example

For a property worth 200,000 Amount Percentage
Cash deposit 10,000 5%
Equity loan 40,000 20%
Your mortgage 150,000 75%

If the home in the table above sold for 210,000, you'd get 168,000 (80%, from your mortgage and the cash deposit) and pay back 42,000 on the loan (20%). You'd need to pay off your mortgage with your share of the money.

Scheme 2: Help to Buy London example

For a property worth 200,000 Amount Percentage
Cash deposit 10,000 5%
Equity loan 40,000 20%
Your mortgage 150,000 75%

If the home in the table above sold for 420,000, you'd get 252,000 (60%, from your mortgage and the cash deposit) and pay back 168,000 on the loan (40%). You'd need to pay off your mortgage with your share of the money.

For more details visit the Help to Buy website