Help to Buy Equity Loan, What You Owe and What Happens When You Sell

What the Help to Buy Equity Loan Was

The Help to Buy: Equity Loan scheme, administered in England by Homes England, provided government loans of up to 20% of a new-build property's purchase price (40% in London) to first-time buyers. Buyers needed a minimum 5% deposit and a repayment mortgage covering the remainder. The scheme closed to new applications in October 2022. However, large numbers of homeowners took out equity loans between 2013 and 2022, and those loans remain outstanding.

What You Actually Owe

The equity loan is not a fixed cash amount, it is a percentage of your property's current market value. If you borrowed 20% of a £250,000 property (£50,000) and your property is now worth £320,000, you owe 20% of £320,000, which is £64,000. The loan tracks property value, not a fixed sum. In a rising market, the amount you owe increases even though you are not borrowing any more money.

Interest and Management Fees

For the first five years after purchase, the equity loan is interest-free. From year six, interest is charged at 1.75% of the outstanding loan value in year one, increasing annually by the Consumer Price Index (CPI) plus 2%.

Repaying the Equity Loan

You can repay at any time after the first year. Partial repayments must be a minimum of 10% of the current market value. To repay, you must commission an independent RICS-registered surveyor to value the property, this is mandatory and the cost is met by you. Homes England confirms the repayment amount based on the surveyor's valuation.

What Happens When You Sell

When you sell a Help to Buy property, the equity loan must be repaid from the sale proceeds. The repayment amount is calculated as the same percentage of the agreed sale price. Your conveyancing solicitor will notify Homes England of the sale and request a redemption statement.

Remortgaging and the Equity Loan

When remortgaging, your mortgage lender requires Homes England's consent if the new mortgage exceeds your original mortgage amount. Some lenders will not lend on Help to Buy properties, which can limit remortgage options. Check comparable sold prices on Property Passport UK to help inform your remortgage valuation and repayment planning.