Help to Buy (Equity Loan) guide for first-time buyers

What is Help to Buy (equity loan)?

Help to Buy was designed to help people get onto the property ladder by combining a smaller deposit with an equity loan from the Government. Instead of borrowing the full amount from a mortgage lender, you take out:

• a standard mortgage (from a lender)
• an equity loan (from the Government) that sits alongside your mortgage

This guide explains how the scheme works in practice, what to consider before using it, and what typically happens when the interest-free period ends.

Where Help to Buy was available

Help to Buy was available for new-build purchases in England and Wales. It was not a scheme for existing homes.

Note: Help to Buy had a fixed end date for new applications. If you’re already partway through a Help to Buy journey, the focus is usually on what happens at the end of the interest-free period.

How the Help to Buy structure works

The scheme is often described in terms of percentages, but it’s helpful to understand the moving parts:

1. You provide a deposit (scheme examples often use 5%).
2. The equity loan covers a further portion of the purchase price (the maximum equity loan amount and percentage can vary, including for London).
3. Your mortgage covers the remaining amount.

The interest-free period

The equity loan was interest-free for an initial period. After that, interest may become payable, and the overall cost of the equity loan can change depending on how and when it’s repaid.

Key advantages of Help to Buy

Help to Buy can be attractive because it may:

• reduce the size of the mortgage you need compared with borrowing the full purchase price
• lower your loan-to-value (LTV) on the mortgage element, which can affect the range of mortgage options you can access
• make it possible to buy sooner by using the equity loan to bridge the gap between deposit and mortgage

Important drawbacks and risks to consider

Help to Buy isn’t “free money”. The equity loan is repayable, and the way it’s repaid can be influenced by property value changes.

Common considerations include:

• Interest may apply after the interest-free period, increasing monthly outgoings if you don’t repay or restructure.
• Repayment is linked to the Government’s share of the property value at the time you repay or sell.
• Not all lenders may be willing to support every Help to Buy scenario, which can affect remortgaging options later.
• Fees can apply at certain points (for example, when repaying or making changes involving the equity loan).

What happens when the interest-free period ends?

When the interest-free period comes to an end, homeowners generally consider three broad routes:

1. Remortgage (either to keep the equity loan or to repay some/all of it)
2. Stay put and repay the equity loan (in part or in full) and/or pay any interest that becomes due
3. Sell the property and repay the equity loan from sale proceeds

The best route depends on affordability, the mortgage options available at that time, and how the property’s value has changed.

Option 1: Remortgaging

Remortgaging can be used in different ways, depending on your circumstances.

Remortgage while keeping the equity loan

Some borrowers remortgage their main mortgage but continue to hold the equity loan. This may help manage monthly payments, but it doesn’t remove the equity loan obligation.

Remortgage to repay some or all of the equity loan

In other cases, borrowers may remortgage with the intention of repaying part or all of the equity loan, which can reduce future exposure to interest and repayment calculations.

Practical points to factor in

• Affordability and payment changes: your ability to remortgage depends on your income, existing commitments, and the new mortgage terms.
• Timing within your current mortgage term: if you’re still in a fixed or introductory period, the timing of any switch can matter.
• Lender acceptance: some lenders may have specific requirements for customers with Help to Buy.
• Additional costs: there may be scheme-related administration fees on certain equity loan actions, on top of standard mortgage costs.

Option 2: Staying put and dealing with the equity loan

If you plan to remain in the property, you’ll usually be looking at how to handle the equity loan after the interest-free period.

Paying interest and/or repaying the equity loan

Depending on your situation, you may:

• start paying interest on the equity loan
• repay the equity loan in part or in full

Repayment rules can include minimum repayment thresholds, and repayment typically involves an assessment of the outstanding loan amount.

Valuation and assessment

To determine the amount due, an assessment is usually required (often involving a surveyor valuation). This can affect the timing and cost of repayment.

Option 3: Selling and repaying the equity loan

Selling is often considered when you want to move on, and it can also be a way to clear the equity loan.

How repayment works on sale

When you sell, the equity loan is repaid from the sale proceeds. The Government’s share is based on the agreed structure of the scheme, meaning the amount repayable can be influenced by changes in property value.

If the property value falls

If the value of the property decreases, the repayment calculation can still reflect the scheme’s share. This is one reason it’s important to understand the repayment mechanics rather than assuming outcomes will always be favourable.

Help to Buy and property value changes: why it matters

A key feature of Help to Buy is that the equity loan is tied to the property’s value at repayment or sale. That means:

• if prices rise, the equity loan repayment can be higher than the original equity loan amount
• if prices fall, the repayment may be lower than it would have been at higher values, but it can still be affected by the scheme’s share rules

This is why planning for more than one scenario can be useful when you’re thinking ahead.

Planning ahead: what to review before making decisions

If you’re approaching the end of the interest-free period (or considering how it might affect your future), it can help to review:

• your monthly affordability if interest becomes payable
• whether your current mortgage deal is fixed/introductory and what that means for remortgaging timing
• the potential impact of property value changes on repayment
• any scheme-related costs that could apply when repaying or restructuring
• whether your preferred route aligns with the mortgage options likely to be available at that time

Where mortgage advice fits in

Help to Buy can add complexity because you’re managing two elements of borrowing (the mortgage and the equity loan). A mortgage adviser can help you understand how your overall borrowing picture may affect the options available later—particularly around remortgaging and product switching.

Key points to remember

• Help to Buy combines a standard mortgage with a Government equity loan.
• The equity loan is interest-free for an initial period, after which interest may apply.
• When the interest-free period ends, the main routes are remortgage, stay put and repay/pay interest, or sell.
• Repayment can be influenced by property value changes and scheme rules.

Important information

Think carefully before securing debt against your home. Your home may be repossessed if you do not keep up with repayments on a mortgage or any other debt secured on it.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances.