How to Leverage the UK’s Help to Buy Scheme for New Developers?

April 17, 2024

For those of you interested in property development, understanding the intricacies of finance, mortgages, and government schemes can open a world of opportunity. One such scheme is the UK’s Help to Buy. Launched to promote property ownership and stimulate the housing market, it can also offer a boon to new developers.

In this article, we will delve into the Help to Buy scheme, explore how it impacts the mortgage market, and offer insights on how new developers can leverage it to their advantage. We will take you through key concepts such as Loan to Value (LTV), bridging loans, and development funding, while maintaining focus on our central theme of property development.

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Help to Buy Scheme – An Introduction

The Help to Buy scheme was instituted by the UK government to make homeownership more accessible to those unable to afford hefty mortgage deposits. The scheme consists of an equity loan where the government lends up to 20% of the cost of a newly built home, meaning the buyer needs only a 5% cash deposit and a 75% mortgage to make up the rest. In London, the scheme lends up to 40% due to higher property prices.

For new developers, the Help to Buy scheme isn’t just about selling properties, but more about how to strategically use the scheme to build a successful business model. To begin with, properties built under the scheme must meet certain standards and criteria. This gives developers an advantage as these homes are more likely to be attractive to potential buyers.

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Shaping Finance and Mortgages

The Help to Buy scheme has a noticeable impact on the mortgage market. With the scheme, buyers are able to secure mortgages with just a 5% deposit. Also, the interest rates on these mortgages are usually lower than traditional mortgages. This makes it easier for developers to sell their properties and for buyers to afford them.

For developers, understanding the nuances of the mortgage market is crucial. Mortgage lenders often look at the Loan to Value (LTV) ratio which is the percentage of the property’s value that is being borrowed. The lower the LTV, the less risk for the lender and, therefore, the more favourable the loan terms.

Leveraging the Help to Buy Scheme

As a developer, there are several ways you can leverage the Help to Buy scheme to your advantage. One of the best ways is to build properties that qualify for the scheme. By doing so, you will widen your potential market and increase the likelihood of quickly selling your properties.

Furthermore, you can use the scheme to draw in first-time buyers by offering them a more affordable stepping stone into property ownership. This way, you’re not only helping them realise their dreams of owning a home, but you’re also securing your own business interests.

Bridging Loans and Development Funding

Bridging loans, a type of short-term funding, are another area where developers can leverage to their advantage. These are typically used to finance the purchase of a new property before the sale of an existing one has been completed.

In terms of property development, bridging loans can be used to cover the initial costs associated with a project until long-term financing can be secured. Knowing how to effectively use these loans can greatly aid in the success of a development project.

Development funding, another form of finance, is also an option. This is a loan specifically designed to fund the construction and development of buildings. Lenders offer this type of funding to experienced property developers and builders, often on a short to medium-term basis.

Market Perception and Future Prospects

The Help to Buy scheme has been perceived positively in the market. It has been credited with boosting the housing market and increasing homeownership rates among the younger population. The scheme has also helped new developers grow their businesses and contribute to the UK’s housing supply.

However, the future of the scheme remains uncertain. It’s crucial for developers to stay updated on any changes to the scheme, as it will impact how they plan their projects and finances.

As a new developer, leveraging the Help to Buy scheme, bridging loans, and development funding, can provide a solid foundation in the property development sector. Understanding the market, keeping abreast of the latest developments, and making strategic decisions based on these insights are the keys to success in this field.

Utilising Development Finance and Property Finance

Development finance is a specialised form of funding that is designed to help developers with the costs associated with building and selling properties. This type of finance is usually structured as a short-term loan that covers the cost of land acquisition, construction, and sales. For new developers, understanding how to effectively use development finance can provide the necessary resources to start and complete projects.

Firstly, it’s essential to understand that development finance lenders base their lending decisions on the Gross Development Value (GDV) of a project. This is the estimated value of the project once it is completed. Lenders typically lend a percentage of the GDV, typically around 60% to 70%.

However, the actual amount of finance available will also depend on factors such as the location of the property, the developer’s experience, and the viability of the project. Lenders will also look at the Loan to Value (LTV) ratio, similar to mortgage lenders. A lower LTV ratio will generally result in more favourable loan terms.

Property finance, on the other hand, is a broader term that includes a variety of loans and financial products designed for property investors and developers. This includes bridging loans, buy to let mortgages, commercial property loans, and more. Like development finance, the terms of property finance are usually tailored to the specifics of each project.

It is essential for developers to understand the different types of property finance available and how to leverage them. For example, a bridging loan can be used to secure a site before planning permission is granted, while a buy to let mortgage can be used to finance a property that will be rented out.

Understanding Mortgage Guarantee and Shared Ownership

Two key aspects that new developers should understand are mortgage guarantees and shared ownership.

A mortgage guarantee is a type of mortgage product where a third party, usually a government entity or family member, agrees to repay the mortgage if the borrower defaults. The UK’s Help to Buy scheme includes a mortgage guarantee, which can provide additional security and reassurance to lenders. This can enable developers to secure more favourable mortgage terms and interest rates, which can make their properties more attractive to buyers.

Shared ownership, on the other hand, is a scheme where a buyer purchases a share of a property and pays rent on the remaining share, which is usually owned by a housing association. This can make properties more affordable for buyers who cannot afford to buy a property outright. Developers can leverage shared ownership schemes to attract a wider range of buyers and sell properties more quickly.

By understanding these concepts and how they interact with other elements of the property market, such as LTV mortgages, interest rates, and affordable housing, developers can make informed decisions that can lead to successful projects.


The UK’s Help to Buy scheme, along with development finance and property finance, provides new developers with a wide range of tools and opportunities. By understanding these concepts and how to leverage them, developers can raise the required capital and build a successful property development business.

However, like any business venture, property development comes with risks. It’s crucial to stay updated on market trends, regulatory changes, and the latest developments in finance and mortgages. This will enable developers to adapt their strategies and make informed decisions that can lead to long-term success.

In conclusion, the property development sector can be complex and challenging, but for those who are willing to invest the time and effort to understand it, it can also be rewarding. With careful planning, strategic decision-making, and a solid understanding of finance and mortgages, developers can realise their vision and contribute to the growth and prosperity of the UK’s housing market.