The Help to Buy equity loan was a flagship government scheme designed to help first-time buyers in England get onto the property ladder. Launched in 2013 and closed to new applicants in March 2023, the scheme allowed buyers to purchase a new-build home with just a 5% deposit, supported by a government equity loan of up to 20% of the property's value (or 40% in London).
Although the scheme is no longer accepting new applications, hundreds of thousands of homeowners across England still hold active Help to Buy equity loans. Understanding how the scheme works remains essential for those managing their existing loans and planning for the future.
How the Help to Buy Equity Loan Works
The mechanics of Help to Buy are straightforward. When purchasing a new-build property, buyers contributed a minimum 5% deposit from their own savings. The government then provided an equity loan of up to 20% of the purchase price (40% in London under the Help to Buy: London scheme). The remaining balance, typically 75%, was covered by a standard repayment mortgage from a qualifying lender.
For example, on a property costing £300,000 outside London, the breakdown would be: a £15,000 deposit (5%), a £60,000 government equity loan (20%), and a £225,000 mortgage (75%). This structure meant buyers needed a much smaller mortgage relative to the property value, often securing better interest rates as a result.
Crucially, the equity loan is interest-free for the first five years. From year six onwards, interest charges begin at 1.75% of the loan's value, increasing annually by the Consumer Price Index (CPI) plus 2%. This escalating cost structure is one of the most important aspects for existing borrowers to understand and plan for.
Eligibility and Price Caps
The final phase of Help to Buy, which ran from April 2021 to March 2023, was restricted exclusively to first-time buyers. Earlier versions of the scheme had been open to home movers as well. To qualify, applicants needed to purchase a new-build property from a registered Help to Buy builder, and the property had to be the buyer's only and primary residence.
Regional property price caps were introduced in the final phase to ensure the scheme targeted those who needed it most. These caps varied significantly across England, from £186,100 in the North East to £600,000 in London. The South East cap stood at £437,600, while the East of England was set at £407,400. These limits meant the scheme was tailored to local market conditions rather than applying a one-size-fits-all approach.
Buyers were also required to fund their deposit from their own resources and could not use gifted deposits in certain circumstances. The property had to be purchased with a repayment mortgage (not interest-only), and buy-to-let mortgages were not permitted.
Applying Through a Help to Buy Agent
To apply for the scheme, buyers first needed to contact their regional Help to Buy agent. These agents were responsible for assessing eligibility, processing applications, and issuing an Authority to Proceed letter. This letter confirmed the buyer was approved and allowed the house builder to proceed with the sale under the Help to Buy terms.
The process typically took several weeks, and buyers were encouraged to apply early in their house-hunting journey. Once approved, the equity loan was arranged alongside the buyer's mortgage, with completion handled by the buyer's solicitor in coordination with the Help to Buy agent and Homes England.
Repayment Obligations
The Help to Buy equity loan must be repaid in full when the property is sold or at the end of the 25-year loan term, whichever comes first. A key detail that surprises many borrowers is that the amount owed is based on the property's current market value, not the original purchase price. If your home has risen in value, you will owe more than you originally borrowed; if it has fallen, you will owe less.
Voluntary partial repayments are permitted at any time, but must be at least 10% of the property's current market value. Each repayment requires a RICS-accredited valuation at the borrower's expense. Many homeowners choose to remortgage in order to raise the funds needed to repay the equity loan, especially before the interest-free period ends.
The administration of Help to Buy equity loans is handled by Target Group on behalf of Homes England. All repayment enquiries, valuation submissions, and account management go through their dedicated portal. You can find full details on the official gov.uk Help to Buy page.
If you hold an existing Help to Buy equity loan and want to understand your future costs, use our Help to Buy Calculator to model different scenarios and plan your repayment strategy.