Help to Buy Equity Loan: How It Worked & What Replaced It (2026)

By Wealthvieu · Updated

The Help to Buy Equity Loan was one of the UK’s most popular homeownership schemes. It closed to new applications in March 2023, but understanding it still matters — many homeowners have active Help to Buy loans, and the replacement schemes are built on similar principles.

Table of Contents

What Was Help to Buy?

Feature Details
Type Government equity loan for new-build homes
Available 2013-2023
Buyer contribution 5% deposit minimum
Government loan 20% of purchase price (40% in London)
Mortgage needed Remaining 75% (55% in London)
Interest-free period First 5 years
Property cap (final phase) £186,100-£600,000 (varied by region)
Eligibility First-time buyers only (from 2021)

How the Equity Loan Worked

Example: £250,000 New-Build Home

Component Amount Percentage
Your deposit £12,500 5%
Government equity loan £50,000 20%
Mortgage £187,500 75%

London example (£450,000 home):

Component Amount Percentage
Your deposit £22,500 5%
Government equity loan £180,000 40%
Mortgage £247,500 55%

Help to Buy Interest Charges

The equity loan was interest-free for the first 5 years. After that:

Year Interest Rate Monthly Fee (on £50,000 loan)
1-5 0% £0
6 1.75% £73
7 1.75% + RPI + 1% ~£83
8 Above + RPI + 1% ~£93
10 Compounding annually ~£115
15 Compounding annually ~£160

Important: The interest rate increases by the Retail Price Index (RPI) plus 1% each year after year 6. With RPI averaging 3-5%, this adds up quickly.

Repaying Your Help to Buy Loan

Repayment Option Details
Full repayment Pay off the full equity loan at any time
Staircasing Pay off in chunks of at least 10% of property value
At sale Loan repaid from sale proceeds

Critical: You repay a percentage of your home’s current value, not the original loan amount.

Scenario Original At Repayment You Repay
Home value rose 20% £50,000 (20%) Home worth £300,000 £60,000
Home value fell 10% £50,000 (20%) Home worth £225,000 £45,000

Regional Property Price Caps (Final Phase)

Region Price Cap
North East £186,100
North West £224,400
Yorkshire & Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
London £600,000
South East £437,600
South West £349,000

What Replaced Help to Buy

Since Help to Buy closed in 2023, several alternatives exist for first-time buyers:

Current Schemes Comparison

Scheme Deposit Needed Property Cap Key Feature
Mortgage Guarantee Scheme 5% £600,000 Government guarantees lender losses
Shared Ownership 5-10% of share Varies by area Buy 25-75% of home, rent the rest
First Homes 5% £250,000 (£420K London) 30-50% discount on new-builds
Lifetime ISA (LISA) N/A £450,000 25% bonus on savings up to £4,000/year
Right to Buy Varies N/A Council tenants buy at discount

Mortgage Guarantee Scheme

Feature Details
Launched April 2021, extended to June 2025
How it works Government guarantees 95% LTV mortgages
Property type New-build or existing, any type
Price cap £600,000
Eligibility Any buyer (not just first-time)
Your benefit Access to 95% LTV rates from major lenders

Shared Ownership

Feature Details
Minimum share 25% (some allow 10%)
Maximum share 75% initially, staircase to 100%
Rent Paid on housing association’s share (~2.75%)
Staircasing Buy additional 5-10% shares over time
Best for Buyers who can’t afford full ownership

Lifetime ISA (LISA)

Feature Details
Annual contribution limit £4,000
Government bonus 25% (up to £1,000/year)
Property price cap £450,000
Age to open 18-39
First purchase only Yes
Withdrawal penalty 25% if not used for home or retirement

If You Currently Have a Help to Buy Loan

Action checklist:

Priority Action Why
1 Know your year-6 date Interest charges start then
2 Get a property valuation Repayment is based on current value
3 Calculate total cost of keeping the loan Interest compounds annually by RPI + 1%
4 Explore remortgaging You may be able to remortgage and repay the equity loan
5 Consider staircasing Partial repayment in 10% chunks

Remortgaging to Repay the Equity Loan

Factor Consideration
Current LTV Must have enough equity for a new mortgage
Property valuation RICS surveyor valuation required
Administration fee £200 to process the repayment
Timing Before year 6 to avoid interest charges

Example: Remortgaging to clear Help to Buy

Detail Value
Original home price £250,000
Current value £290,000
Help to Buy (20%) £58,000 (20% of current value)
Original mortgage balance £175,000
New mortgage needed £233,000
New LTV 80%

Key Takeaways

  1. Help to Buy closed in March 2023 — no new applications are accepted, but existing loans still need managing
  2. Interest charges start in year 6 and compound annually by RPI + 1%, making early repayment worthwhile
  3. You repay a percentage of current value, not the original amount — if your home rose in value, you owe more
  4. The Mortgage Guarantee Scheme is the closest replacement — 5% deposit on homes up to £600,000
  5. A Lifetime ISA gives a free 25% bonus toward your first home deposit (up to £1,000/year)
  6. If you have a Help to Buy loan, consider remortgaging before year 6 to avoid escalating interest
  7. See our mortgage payment calculator to model repayment scenarios
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