Help to Buy: Equity Loan

You can no longer apply for a Help to Buy: Equity Loan for properties in England.

Find out about other ways to get financial help from the government to buy a home.

You can still apply for an equity loan in Wales.

If you bought your home with a Help to Buy: Equity Loan

You’ll need to:

  • pay interest on your equity loan
  • pay a management fee
  • repay your loan

How much you need to pay in interest and loan repayments depends on the equity loan percentage you borrowed.

Example

Property purchase price Equity loan percentage Equity loan amount borrowed
Bought for £200,000 Borrowed 20% £40,000

The equity loan percentage used to calculate your interest and repayments is 20%.

Interest payments

You do not have to pay interest for the first 5 years. In the sixth year, you’ll be charged interest at a rate of 1.75%. This will be applied to the equity loan amount you originally borrowed (the equity loan percentage of the property purchase price). This annual interest is spread over the year in monthly payments.

Example

Property purchase price Equity loan percentage Equity loan Annual interest payment in year 6 (1.75% of the equity loan) Monthly interest payment in year 6
Bought for £200,000 Borrowed 20% £40,000 £700 £58.33

The interest rate increases every year in April, by adding the Consumer Price Index (CPI) plus 2%. If you bought your home with the earlier Help to Buy: Equity Loan (2013-2021) scheme, the interest rate increases by adding the Retail Price Index (RPI) plus 1%.

Your interest payments will decrease if you make a part repayment of the equity loan. This is because the amount the interest rate is applied to will reduce.

Fees

You’ll need to pay a monthly management fee of £1 until you pay off the equity loan.

If you change your equity loan, including if you remortgage or make an equity loan repayment, you’ll need to pay administration fees.

You’ll also have to pay other fees associated with buying and owning a home, for example, legal and mortgage arrangement fees and for market value reports.

Paying interest and fees does not count towards paying back the equity loan. If you do not keep up with payments, you may need to pay recovery costs or interest on the amount you owe.

Paying back the equity loan

You can pay back part or all of your equity loan at any time.

Repayments are based on your equity loan percentage and the market value of your home at the time you want to make a repayment.

You’ll need to get a market valuation report from a chartered surveyor when you make a repayment.

Read more detailed guidance on repaying your equity loan.

Paying back part of your equity loan

The smallest repayment you can make is 10% of the market value of your home.

Paying back part of your equity loan will reduce the monthly interest payments you’ll need to pay from the sixth year of taking out the equity loan.

Example

Market value of your home Equity loan percentage Amount
Bought for £200,000 Borrowed 20% £40,000
Value at time of repayment £220,000 Paying back 10% £22,000

Your remaining equity loan is 10% of the market value of your home.

From the sixth year, you’ll be charged interest monthly at a rate of 1.75% on 10% of the original property purchase price. The interest rate will increase every year in April, by adding the Consumer Price Index (CPI) plus 2%.

Paying back all your equity loan

You must repay all your equity loan when you:

  • reach the end of the equity loan term (normally 25 years)
  • pay off your repayment mortgage
  • sell your home

You may also be asked to repay the equity loan in full if you do not keep to the terms and conditions.

If you sell your home, you’ll pay the equity loan percentage of the market value or agreed sale price if it’s higher.

Example

Market value of your home Equity loan percentage Amount
Bought for £200,000 Borrowed 20% £40,000
Value at time of full repayment £250,000 Paying back 20% £50,000

If you want to pay off your equity loan and you’ve previously made part repayments, you’ll pay the equity loan percentage you still owe of the market value.

Example

Market value of your home Equity loan percentage Amount
Bought for £200,000 Borrowed 20% £40,000
Value at time of part repayment £220,000 Paying back 10% £22,000
Value at time of full repayment £240,000 Paying back 10% £24,000

Manage your Help to Buy loan

Read guidance on how to:

Get help

Contact the Help to Buy customer service team for help managing your equity loan.

Help to Buy customer services [email protected]
Telephone: 0300 123 4123
Find out about call charges

Help to Buy customer services
PO Box 5262
Lancing
BN99 9HE

You can also read the Help to Buy: Equity Loan homebuyers’ guide.

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