How does the new Help to Buy scheme (2021–2023) work?

What was the Help to Buy equity loan scheme (2021–2023)?

The Help to Buy equity loan (2021–2023) was designed to help first-time buyers purchase a new-build home with a smaller deposit than would otherwise be required.

It worked by combining:

• a mortgage from a lender, and
• an equity loan from the government (through the scheme), which you repay later.

The scheme window is now historical, but the mechanics can still be useful if you’re buying a home that completed under the programme, or if you already have an equity loan and want to understand what happens next.

Who could use the 2021–2023 scheme?

The 2021–2023 scheme was restricted to first-time buyers. Home-movers could not apply.

It also applied to new-build homes.

How much equity loan could you get?

Under the 2021–2023 scheme, the maximum equity loan was:

• up to 20% of the property value outside London
• up to 40% of the property value in London

Minimum deposit and how the numbers were treated

A key feature of the scheme was a minimum deposit of 5%.

In practice, the way the deposit and equity loan were assessed could affect the overall loan-to-value (LTV) position used for mortgage affordability and product selection. This means some borrowers may have been able to access mortgage products that are typically associated with lower LTVs than a straightforward 95% mortgage.

A typical example (outside London)

Imagine a new-build purchase price of £300,000 outside London.

• 5% deposit = £15,000
• 20% equity loan = £60,000
• remaining 75% to fund via mortgage = £225,000

This structure is one reason the scheme could make the purchase feel more achievable: the equity loan reduces the mortgage amount required.

Regional price caps (April 2021 to March 2023)

The scheme introduced regional price caps. The equity loan could only be used if the property price was within the relevant cap for the area.

What happened after the interest-free period?

The equity loan was interest-free for the first five years.

After the five-year period, you would need to start paying interest on the equity loan.

Example of the post-five-year interest cost (illustrative)

Using the earlier example outside London:

• equity loan = £60,000 (20% of £300,000)
• interest starts at 1.75% (as set under the scheme)

Annual interest would be:

• £60,000 × 1.75% = £1,050 per year

Monthly interest would be approximately:

• £1,050 ÷ 12 = £87.50 per month

Important planning point: during this phase, the interest is payable on the equity loan. You would still need a plan for how the capital (the equity loan amount) will be repaid later.

Planning for repayment (capital) after the interest-only period

Because the equity loan capital is not repaid during the interest-only phase, many borrowers need a strategy for how they will eventually repay the capital. Common approaches include:

• building savings over time to repay the equity loan capital, or
• arranging a later remortgage to help fund repayment.

The right approach depends on affordability, property value changes, and the terms available at the time you come to repay.

Remortgaging to consolidate the equity loan

One option sometimes considered is remortgaging and consolidating the equity loan into a new mortgage arrangement.

Practical considerations can include:

• Revaluation: the repayable amount can be based on the equity loan percentage applied to the new valuation.
• Valuation requirements: the valuation process may need to follow the scheme’s requirements.
• Costs: there can be additional costs associated with redemption, such as administration and legal fees.

Because the repayable amount can change with the property’s value, it’s important to treat consolidation as a financial plan rather than a simple extension of the original mortgage.

Key takeaways for first-time buyers

• The 2021–2023 Help to Buy equity loan was for first-time buyers buying new-build homes.
• You could put down a minimum 5% deposit, with the scheme adding an equity loan (up to 20% outside London and 40% in London).
• Regional price caps applied, limiting which properties qualified.
• The equity loan was interest-free for five years, then interest payments began.
• After interest starts, you still need a plan for how the equity loan capital will be repaid later—often involving savings and/or remortgaging.

How this affects your mortgage decision

Understanding the scheme mechanics can help you model the full picture: not just the deposit and mortgage amount at purchase, but also the longer-term impact of interest payments and the eventual repayment of the equity loan.

If you already have an equity loan, reviewing the timeline and considering how you might repay the capital can be a useful part of your overall homeownership planning.