_edited.png)
Help to Buy Wales: A Comprehensive Guide for First Time Buyers
Updated: Mar 22
As a mortgage broker based in Cardiff specialising in first-time buyers, we know how crucial the Help to Buy Wales scheme has been in helping people get onto the property ladder. In this blog post, we'll answer some of the most frequently asked questions about the program, including eligibility criteria, interest rates, and alternative options.
Table of Contents
1. Is Help to Buy Wales ending?
No. The help to buy wales scheme was origanlly going to end on the March 31, 2023, however, it has been extended to the 31st Marth 2025. Good News for first-Time Buyers.
2. What are the conditions for Help to Buy Wales?
To qualify for Help to Buy Wales, you must meet the following conditions:
Be a first-time buyer or a home mover.
Purchase a new build property with a purchase price of up to £300,000.
Provide at least a 5% deposit.
Obtain a mortgage to cover the remaining cost of the property (at least 75%).
Use the property as your primary residence and not rent it out.
3. What happens after 5 years of Help to Buy?
After the first five years of the Help to Buy equity loan, you will be charged interest at 1.75%, which will rise annually by the Retail Price Index (RPI) plus 1%. You can choose to pay off the equity loan or sell the property and repay the loan from the sale proceeds.
4. How does the Help to Buy ISA work in Wales?
The Help to Buy ISA in Wales works as follows:
Open a Help to Buy ISA account with a participating bank or building society.
Save up to £200 per month, with an initial deposit of up to £1,200.
When you're ready to purchase your first home, your solicitor will apply for the government bonus of 25% on your savings (up to £3,000).
Use the combined funds (savings + bonus) as a deposit for your first home.
5. How much do I need to earn to get a mortgage of £250,000?
The amount you need to earn to get a mortgage of £250,000 depends on various factors such as your credit history, deposit size, and other financial commitments. Generally, mortgage providers lend up to 4.5 times your annual income. To afford a £250,000 mortgage, you would need to earn around £55,555 per year. However, it's crucial to consult a mortgage broker to assess your specific circumstances and find the best mortgage deal for you.
6. Who is not eligible for Help to Buy?
You're not eligible for Help to Buy if you:
Are not a first-time buyer or home mover.
Intend to purchase a property with a purchase price above £300,000 (in Wales).
Want to buy a second home or investment property.
Plan to rent out the property.
Have sufficient income or savings to purchase the property without the equity loan.
7. What are the negatives of a Help to Buy ISA?
Some downsides of a Help to Buy ISA include:
Limited to new build properties.
Maximum property value limits (£300,000 in Wales).
The bonus cannot be used for the initial deposit, only for completion.
You can't pay more than £200 per month (excluding the initial £1,200 deposit).
The maximum government bonus is £3,000, limiting the overall benefit.
8. What is the interest rate on Help to Buy Wales?
The Help to Buy Wales equity loan is interest-free for the first five years. After that, interest starts at 1.75% and increases annually by the Retail Price Index (RPI) plus 1%.
9. Is it worth keeping Help to Buy ISA?
If you already have a Help to Buy ISA, it's worth continuing to save, as the government bonus can significantly boost your savings. However, if you're considering opening a new account, a Lifetime ISA may be a better option, as it offers a similar bonus but with higher contribution limits and flexibility for retirement savings.
10. Why would you be declined for Help to Buy?
You might be declined for Help to Buy if you:
Don't meet the eligibility criteria.
Have a poor credit history.
Cannot obtain a mortgage to cover the remaining property cost.
Have a high debt-to-income ratio.
Fail to provide the required documentation.
11. Is there a salary limit for Help to Buy?
There is no specific salary limit for Help to Buy, but you must be able to afford a mortgage covering at least 75% of the property's value. Mortgage providers typically lend up to 4.5 times your annual income, so your salary should be sufficient to qualify for a mortgage.
12. What will replace Help to Buy 2023?
The Scheme has been extended to 31st March 2023 to provide First-Time Buyers more time to take advange.
13. What is better than a Help to Buy ISA?
A Lifetime ISA (LISA) may be a better option than a Help to Buy ISA, as it offers similar government bonuses but with higher contribution limits and more flexibility. With a LISA, you can save up to £4,000 per year and receive a 25% government bonus on your savings, up to a maximum bonus of £1,000 per year. Additionally, you can use the LISA funds to purchase your first home or save for retirement, providing more flexibility in how you use your savings.
14. When should I stop paying into Help to Buy ISA?
You should stop paying into your Help to Buy ISA when:
You reach the maximum government bonus threshold of £12,000 in savings, which equates to a £3,000 bonus.
You're about to purchase your first home and need to access the funds.
You decide to switch to a Lifetime ISA or another savings option that better suits your needs.
Remember that you can only receive the government bonus when you're ready to buy your first home, and the funds must be used for completion, not the initial deposit.
15. What happens if I have more than £12,000 in my Help to Buy ISA?
If you have more than £12,000 in your Help to Buy ISA, you will not receive a government bonus on the amount exceeding £12,000. The maximum government bonus available is £3,000, which is awarded on savings of up to £12,000. Any additional savings in the ISA will still earn interest, but they will not be eligible for the bonus. You can use these additional funds towards your home purchase, but it's essential to consider other savings options if you've already maximized the Help to Buy ISA benefits.
Conclusion
Help to Buy Wales has been a valuable resource for first-time buyers and home movers looking to purchase new build properties in Wales. With the scheme ending in March 2025, it's essential to consider other available options and make the most out of your Help to Buy ISA if you already have one.
As a mortgage broker specializing in first-time buyers based in Cardiff, we're here to help you navigate the complexities of the housing market and find the best mortgage solutions tailored to your needs. Don't hesitate to contact us for expert advice and guidance on your home-buying journey.
More Information on the Help to Buy Wales Scheme
Help to Buy Wales is a government-backed scheme designed to assist first-time buyers and home movers in purchasing new build properties in Wales. The scheme provides an equity loan of up to 20% of the property's value, allowing buyers to secure a mortgage with a smaller deposit.
Here's an overview of how the scheme works:
Equity Loan: The Welsh Government provides an equity loan of up to 20% of the property's value. This loan is interest-free for the first five years. After that, interest starts at 1.75% and increases annually by the Retail Price Index (RPI) plus 1%.
Deposit: You must provide at least a 5% deposit of the property's value.
Mortgage: You need to obtain a mortgage to cover the remaining 75% of the property's value. This mortgage should come from a participating lender and can be a repayment or interest-only mortgage.
Property Value Limit: The maximum purchase price for a property using Help to Buy Wales is £300,000.
Repaying the Equity Loan: You can choose to pay off the equity loan at any time, either in installments or as a lump sum. If you sell the property, you must repay the loan from the sale proceeds.