How Help to Buy Worked
Help to Buy: Equity Loan allowed buyers to purchase a new build home with just a 5% cash deposit. The government provided an equity loan of up to 20% of the property value (40% in London), and the buyer took out a mortgage for the remaining 75% (or 55% in London).
Example: £300,000 New Build Outside London
- Your deposit (5%): £15,000
- Government equity loan (20%): £60,000
- Mortgage (75%): £225,000
The equity loan was interest-free for the first five years. From year six onwards, a fee was charged starting at 1.75% of the loan value, increasing annually by the Retail Price Index (RPI) plus 1%.
The loan had to be repaid when you sold the property, remortgaged to repay it, or at the end of your mortgage term — whichever came first. Crucially, the repayment amount was based on the current market value of the property at the time of repayment, not the original purchase price.
Why Help to Buy Closed
The scheme was originally launched in 2013 as a temporary measure to stimulate the housing market after the financial crisis. It was extended multiple times before the government confirmed it would close permanently.
The main criticisms that led to its closure:
- Inflating new build prices: Research by the National Audit Office found that developers raised prices to absorb the equity loan subsidy, meaning buyers were not getting better value — they were paying more for properties that were priced to match the scheme
- Disproportionate benefit to developers: The scheme boosted developer profits significantly, with the major housebuilders reporting record margins during its peak years
- Taxpayer cost: The government's exposure through equity loans reached billions of pounds. If property values fell significantly, the taxpayer would bear part of the loss
- Not reaching those most in need: Many Help to Buy users had sufficient income and savings to purchase without the scheme. It was designed for first-time buyers but was also used by home movers in its earlier form
If You Already Have a Help to Buy Equity Loan
Hundreds of thousands of buyers still have active Help to Buy equity loans. Here is what you need to know about managing yours.
The Interest-Free Period
The equity loan is interest-free for the first five years from the date you completed your purchase. No monthly fees are charged during this period.
Year Six Onwards: Monthly Fees
From the beginning of year six, you must pay a monthly management fee. The initial fee is 1.75% of the original equity loan amount per year, divided into twelve monthly payments.
Each year after that, the fee increases by RPI inflation plus 1%. If RPI is 3%, the fee increases by 4% that year. This means the fees escalate over time and can become significant.
Worked Example
You purchased a £300,000 property with a 20% equity loan (£60,000):
- Year 6 fee: 1.75% x £60,000 = £1,050/year (£87.50/month)
- Year 7 fee (assuming 3% RPI): £1,050 x 1.04 = £1,092/year (£91/month)
- Year 10 fee (compounding): approximately £1,230/year (£102.50/month)
- Year 15 fee: approximately £1,500/year (£125/month)
These fees are on top of your mortgage payment. They do not reduce the equity loan balance — they are purely management fees.
How to Repay the Equity Loan
You can repay the equity loan in several ways:
- Sell the property: The equity loan is repaid from the sale proceeds. You repay the same percentage of the current market value — not the original loan amount. If you borrowed 20% and your property is now worth £350,000, you repay £70,000 (20% of £350,000), not the original £60,000.
- Remortgage: You can remortgage to raise enough capital to repay the equity loan in full. This is common at the five-year mark before fees kick in. You will need the property to have enough equity and your income to support the larger mortgage.
- Partial repayment (staircasing): You can repay the equity loan in chunks of at least 10% of the current property value. This reduces your equity loan percentage and your monthly fees.
- Cash repayment: If you have savings, you can repay part or all of the loan directly.
The Repayment Trap
If your property has increased in value, you will repay more than you borrowed. On a £300,000 purchase with a 20% loan (£60,000), if the property is now worth £400,000, repayment is £80,000 — a £20,000 increase. The government shares in your property's growth.
If your property has decreased in value, you repay less. On the same property, if it is now worth £270,000, repayment is £54,000. However, this also means you have less equity, which may make remortgaging difficult.
Selling a Property with Help to Buy
If you are selling a Help to Buy property, the process involves additional steps:
- Get a valuation: You need a RICS-registered valuer to assess the current market value. This determines the repayment amount.
- Notify the Help to Buy agent: You must inform Target HCA (the administrator) that you intend to sell. They will confirm the repayment amount based on the valuation.
- Repay from sale proceeds: Your solicitor will handle the repayment at completion. The equity loan is settled alongside the mortgage redemption from the sale funds.
- Allow extra time: The valuation and notification process adds approximately two to four weeks to the selling timeline. Factor this into your plans.
Should You Repay Before the Five-Year Mark?
Many Help to Buy owners consider repaying the equity loan before year six when fees start. Here is the decision framework:
- Repay if: You can remortgage to cover the loan, the interest rate on a larger mortgage is lower than the escalating Help to Buy fees, and you have enough equity in the property
- Hold if: The Help to Buy fee in year six (£87.50/month on a £60,000 loan) is still cheaper than the additional mortgage interest you would pay on a larger loan, or if you plan to sell within the next couple of years anyway
Speak to a mortgage broker who has experience with Help to Buy remortgages. They can model both scenarios and show you which option costs less over your planned ownership period.
What Replaced Help to Buy?
There is no direct like-for-like replacement for the Help to Buy Equity Loan. Instead, several alternative schemes now serve different parts of the market:
- First Homes: 30–50% discount on new builds for first-time buyers in England
- Shared Ownership: Buy a 25–75% share of a property and rent the rest
- Lifetime ISA: Government adds 25% bonus to your deposit savings (up to £1,000/year)
- Mortgage Guarantee Scheme: Enables 95% LTV mortgages through a government-backed guarantee
- Own New Rate: Developers subsidise mortgage rates to reduce monthly payments
- Deposit Unlock: Developer-backed insurance allows 95% LTV new build mortgages
- Help to Buy Wales: Equity loan scheme still available in Wales
For a complete guide to all current schemes, see our government schemes guide.
Frequently Asked Questions
Can I still use Help to Buy?
No. Help to Buy: Equity Loan (England) closed to new applications in October 2022 and all purchases had to complete by March 2023. It is not available for new purchases. Help to Buy Wales may still be available — check the Welsh Government website.
What happens if I cannot afford the equity loan fees?
Contact Target HCA (the Help to Buy agent) as soon as possible. Missing payments can lead to enforcement action. If you are struggling, they may be able to discuss your options. Remortgaging to repay the loan or selling the property are the most common solutions.
Can I rent out my Help to Buy property?
Generally no. Help to Buy properties must be your main residence. However, there are limited exceptions — for example, if you need to relocate for work temporarily. You must get written permission from both your mortgage lender and the Help to Buy agent before letting the property.
What if my property is in negative equity?
If your property is worth less than you paid, the repayment amount on the equity loan is also lower (since it is a percentage of current value). However, if you are in negative equity overall (mortgage + equity loan exceeds property value), selling or remortgaging becomes very difficult. Seek professional advice.
Can I make home improvements to increase the value before repaying?
Yes. Increasing the property value before repaying the equity loan means the 20% slice is worth more — but you also benefit from the remaining 80% of the value increase. If you can raise the property value through improvements and then remortgage to repay the loan, you may come out ahead. The maths depends on the cost of improvements versus the value they add.