Help to Buy Equity Loan Explained — How It Works, Costs, and How to Repay

What Was Help to Buy?

The Help to Buy: Equity Loan scheme allowed first-time buyers to purchase a **new build property** with a government equity loan of:

• **20%** of the purchase price in England outside London
• **40%** of the purchase price in Greater London

Buyers needed a minimum **5% deposit** and took a repayment mortgage on the remaining 75% (55% in London). The scheme closed to new applications in **February 2023**.

How the Equity Loan Works

The government’s loan is secured on the property as a second charge behind your main mortgage. You do not make monthly repayments on the equity loan during the first five years — it is interest-free.

The crucial point: the loan is always calculated as a **percentage of the current property value**, not the amount borrowed. If you borrowed 20% of £250,000 (£50,000) and the property is now worth £350,000, you owe 20% of £350,000 = £70,000. The loan has become more expensive in cash terms as the property value has risen.

Management Fees from Year 6

From the start of year 6 (the first month after the fifth anniversary of your equity loan completion), a **management fee** is charged:

• **1.75%** of the original equity loan amount in year 6
• The fee increases annually by **RPI + 1%**

For example, on a £50,000 equity loan: year 6 fee = £875 per year (£72.92 per month). This fee rises each year and continues until you repay or sell.

Your Repayment Options

Full Repayment

You can repay the full equity loan at any time. The repayment amount is based on the **current market value** of the property at the time of repayment, as determined by a RICS-registered valuer. You pay the same percentage of current value that you originally borrowed.

Partial Repayment (Staircasing)

You can repay in **minimum tranches of 10%** of the current property value. This reduces your outstanding loan percentage and therefore your future management fees and final repayment amount. You can staircase multiple times.

Repayment on Sale

When you sell, the equity loan is automatically repaid from the sale proceeds. You receive the balance after both the mortgage and the equity loan are settled.

End of Mortgage Term

If you have not repaid the equity loan by the end of your repayment mortgage, it becomes immediately repayable.

What if Property Values Fall?

If the property’s value falls below the original purchase price, your equity loan repayment amount falls proportionally. You cannot be in “negative equity” on the equity loan element independently of the main mortgage — if the property is worth less, you owe less on the equity loan.

However, if both your mortgage and equity loan together exceed the property value, you may be unable to sell without making up a shortfall — the same risk as negative equity on any mortgage.

Key Risks to Understand

• **Rising property values increase your repayment** — the loan tracks the market, so a significant increase in value means a proportionally larger repayment in cash terms
• **Management fees compound** — by year 10–15 of the loan, annual fees can be substantially higher than in year 6
• **Remortgaging is complicated** — you need your equity loan provider’s consent to remortgage to a new deal; your solicitor must notify Homes England (the equity loan administrator)
• **Valuation costs** — every partial repayment requires a RICS valuation, typically costing £200–£500

Property Passport UK records property ownership information and transaction history, which can assist in tracking the timeline of your equity loan and planning the optimal moment for repayment or sale.