What is Help to Buy?
The Help to Buy equity loan scheme is a UK government initiative designed to help people buy new-build homes with a smaller deposit. The government provides an equity loan of up to 20% of the property value (40% in London), allowing buyers to secure a home with just a 5% deposit and a 75% mortgage.
Important: Scheme Closure
The Help to Buy equity loan scheme closed to new applications on 31st October 2022 in England. Wales closed in December 2022. Scotland has its own schemes. Existing Help to Buy customers still need guidance on repayment and exit strategies.
How Help to Buy Works
New Build Only
Scheme only applies to newly built properties from registered developers.
5% Deposit
Buyers only need a 5% deposit instead of the typical 10-20%.
Government Loan
Government provides 20% equity loan (40% in London) interest-free for 5 years.
75% Mortgage
Remaining 75% funded through traditional mortgage with competitive rates.
Financial Structure Example
£400,000 Property Purchase
Your deposit (5%): £20,000
Government equity loan (20%): £80,000
Mortgage required (75%): £300,000
Total: £400,000
Eligibility Requirements
Who Could Apply (Before Closure)
Income Limits
Household income must not exceed £80,000 per year (£90,000 in London).
Property Value
Property must not exceed regional price caps (£600,000 in most areas, £600,000 in London).
First-Time Buyer
Must be purchasing your first home or be a previous homeowner returning to market.
Mortgage Qualification
Must be able to secure a mortgage for 75% of property value through approved lender.
Property Requirements
- New build only: Property must be newly constructed by registered developer
- Primary residence: Must be your main home, not buy-to-let or second home
- Price caps: Must be within regional price limits set by government
- Building standards: Must meet all building regulations and energy efficiency requirements
Interest and Repayment Terms
Interest-Free Period
First 5 Years
The government equity loan is completely interest-free for the first 5 years. You only pay your mortgage and regular homeownership costs during this period.
After Year 5: Interest Charges
| Year | Interest Rate | Calculation |
|---|---|---|
| Years 1-5 | 0% | No interest charged |
| Year 6 | 1.75% | 1.75% of outstanding loan amount |
| Year 7+ | 1.75% + RPI + 2% | Increases annually by RPI inflation + 2% |
Interest Calculation Example
£80,000 Equity Loan (20% of £400k property)
Years 1-5: £0 annual interest
Year 6: £1,400 annual interest (1.75% of £80,000)
Year 7: Approximately £2,400-£3,200 depending on RPI
Year 8+: Continues to increase with RPI + 2% annually
Repayment Options
When You Can Repay
Repayment Timeline
Years 1-5
Can repay anytime without interest charges. Minimum 10% of original loan amount per repayment.
Year 6+
Interest charges begin. Many customers choose to repay before this point to avoid ongoing costs.
Property Sale
Must repay proportional share when selling. Government gets percentage of sale price equal to their equity share.
25 Years Maximum
Loan must be repaid within 25 years of purchase or when you cease to occupy as main residence.
How Repayment Amount is Calculated
Proportional Repayment System
You don't repay the original loan amount. Instead, you repay the same percentage of the current property value. If house prices rise, you pay more. If they fall, you pay less.
Repayment Example
Original purchase: £400,000 (20% loan = £80,000)
Current value: £500,000
Repayment amount: 20% of £500,000 = £100,000
Your gain/loss: £20,000 additional payment due to house price rise
Calculate Help to Buy Costs
Use our Help to Buy calculator to understand interest charges and repayment scenarios for your situation.
Help to Buy CalculatorExit Strategies
Options for Existing Help to Buy Customers
Full Repayment
Pay off the entire equity loan using savings, remortgaging, or family assistance.
Partial Repayment
Reduce the loan amount by paying off portions (minimum 10% of original amount).
Sell and Move
Sell property and repay government from proceeds, then use remaining equity for next purchase.
Refinance Strategy
Remortgage to higher LTV to raise funds for partial or full equity loan repayment.
Timing Considerations
- Before year 6: Optimal time to repay to avoid interest charges
- Property value assessment: Consider current market value vs. original purchase price
- Interest rate environment: Compare potential equity loan interest with mortgage rates
- Personal finances: Balance repayment against other financial goals and debts
Alternatives to Help to Buy
Current Government Schemes
Shared Ownership
Buy 25-75% of a property and pay rent on the remaining share.
Lifetime ISA
25% government bonus on savings up to £4,000 annually for first home purchase.
First Homes
30-50% discount on new build properties for local first-time buyers.
Right to Buy
Council tenants can buy their homes at significant discounts.
Private Market Options
- High LTV mortgages: 95% mortgages now available from many lenders
- Guarantor mortgages: Family members provide security for higher borrowing
- Family offset mortgages: Family savings offset mortgage interest
- Deposit unlock schemes: Developer-backed schemes with reduced deposits
Financial Planning Advice
For Current Help to Buy Customers
5-Year Planning Strategy
Year 1-2: Assessment
Track property values, build savings, and understand your options before interest charges begin.
Year 3-4: Preparation
Explore remortgaging options, build repayment fund, consider partial repayments if beneficial.
Year 5: Decision
Final year to repay interest-free. Make strategic decision based on property values and personal finances.
Year 6+: Management
If keeping loan, budget for increasing interest payments and plan future exit strategy.
Key Financial Considerations
- Property appreciation: Higher house price growth increases repayment cost
- Interest rate trends: Compare equity loan rates with mortgage rates
- Tax implications: No tax relief available on equity loan interest payments
- Early repayment benefits: Eliminating future interest rate risk and payment obligations
- Opportunity cost: Balance repayment against other investments and debt repayments
Professional Support
When to Seek Advice
Mortgage Broker
For remortgaging options and raising funds for equity loan repayment.
Financial Advisor
For overall financial planning and investment strategy decisions.
Property Valuer
For accurate current property valuations before making repayment decisions.
Tax Advisor
For complex situations involving inheritance, multiple properties, or business ownership.
Avoid Expensive Mistakes
Professional advice typically costs £500-£2,000 but can save tens of thousands in poorly timed decisions. The complexity of Help to Buy repayment calculations makes professional guidance valuable for most customers.
Future of Help to Buy
What Happens Next?
Post-Closure Landscape
With Help to Buy closed to new applicants, the government is focusing on other schemes like Shared Ownership and First Homes. Existing customers will continue managing their equity loans for years to come.
Support for Existing Customers
- Ongoing administration: Help to Buy agents continue supporting existing customers
- Repayment processes: Systems remain in place for partial and full repayments
- Property valuations: Independent valuations available for repayment calculations
- Customer guidance: Government websites and helplines continue operating
Legacy Benefits
Help to Buy helped over 370,000 people buy homes during its operation. While closed to new applicants, the scheme created lasting homeowners who will manage their equity loans strategically over the coming decades.