A guide to Help to Buy: Equity Loan scheme

Over 313,000 homes have been bought with Help to Buy: Equity Loans since the scheme was launched in 2013. Let’s look at how the scheme can help you own your own property.

Over 313,000 homes have been bought with Help to Buy: Equity Loans since the scheme was launched in 2013. Let’s look at how the scheme can help you own your own property.

Daniel Evans
From the Mortgages team
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Posted 30 JUNE 2021

What is the Help to Buy scheme?

There are three Help to Buy schemes, set up by the government, that help people to get on, or move up, the property ladder. They are:

  • Help to Buy: Equity Loan – a loan to help first-time buyers buy a new-build home in England. There are similar schemes in Scotland, Wales and Northern Ireland.
  • Help to Buy: Shared Ownership – this gives you the chance to buy a share of your home and pay rent on the remaining portion. If your household income is less than £80,000 a year, you’ll be able to apply for a Shared Ownership mortgage to buy a 10% to 75% share of the property’s value.
  • Help to Buy: Mortgage guarantee scheme – launched on 19 April 2021, the scheme helps to increase the supply of mortgages for credit-worthy borrowers who have just a 5% deposit. 

How does Help to Buy: Equity Loan work?

With a Help to Buy Equity Loan, the government lends you up to 20% of the value of a newly built home (up to 40% in Greater London) – up to a maximum purchase price – depending on your location. To qualify, you’ll need to have saved a deposit of 5% of the property’s value. You’ll borrow the rest (75%) from a mortgage lender.

For example, to buy a home in England priced at £200,000:

Source of funds Percentage to pay Amount (£)
Your deposit 5% £10,000
Government equity loan 20% £40,000
Mortgage loan 75% £150,000
TOTAL   £200,000

Which banks offer Help to Buy?

You’ll need to use a participating mortgage provider to use the Help to Buy scheme. Not all banks and building societies offer Help to Buy Mortgages – those that do include:

  • Accord
  • Barclays
  • Chorley Building Society
  • Cumberland Building Society
  • Halifax
  • Leeds Building Society
  • Leek Building Society
  • Lloyds Bank
  • Mansfield Building Society
  • Monmouthshire Building Society
  • Nationwide Building Society
  • Newbury Building Society
  • Santander
  • Skipton Building Society
  • Teachers Building Society
  • The Melton Building Society
  • West Brom Building Society

How do Help to Buy: Equity Loans work in London? 

The London Help to Buy scheme works much the same way as the rest of England. The only differences are that equity loans are available for up to 40% of the property value instead of 20%, and the price cap is higher – up to a maximum of £600,000 for a new-build property. This is to compensate for high London property prices compared to the rest of the country. 

For example, to buy a home in London priced at £400,000:

Source of funds Percentage to pay Amount (£)
Your deposit 5% £20,000
Government equity loan 40% £160,000
Mortgage loan 55% £220,000
TOTAL   £400,000

Which lenders offer Help to Buy in London?

Any of the participating lenders above with branches in London should offer Help to Buy in the capital. As the government loan covers a higher portion of the property value in London (up to 40%), you might also be offered a better interest rate.

What are the Help to Buy equity loan price caps?

The maximum property price depends on where in England* you buy it:


Maximum Property Price

North East


North West


Yorkshire and the Humber


East Midlands


West Midlands


East of England




South East


South West


*Source: GOV UK
To be eligible for an equity loan, the property you buy must not be worth more than the price limit for your region.

Is Help to Buy available throughout the UK?

The Help to Buy Equity Loan scheme is only available in England. However, there are similar schemes in other countries of the UK. 

For more information on schemes in Scotland, Wales and Northern Ireland, please visit:

How do the interest charges on the Help to Buy: Equity Loan scheme work?

You won’t need to pay any interest on the equity loan for the first five years. After that, you’ll be charged as follows:

The first five years:

  • the government equity loan is interest-free
  • you’ll pay a £1 monthly management fee for the first five years, which will continue from year six onwards

From year six:

  • you start to pay interest on the loan at 1.75%
  • the 1.75% rate increases each year by the Retail Price Index, plus 2%
  • you continue to pay interest until you repay your loan in full

The interest you pay on your Help to Buy loan doesn’t go towards paying off the government equity loan – so the amount owing on that doesn’t reduce.

As well as repaying your equity loan in full, you must also keep up with repayments on your mortgage – otherwise, your home could be repossessed. 

How is the equity loan paid back?

You don’t have to pay back the loan itself until you sell your home or come to the end of your mortgage term (the length of your mortgage) – whichever is sooner. But if you can afford to, you can start paying back the equity loan earlier if you prefer. 

There are different ways to pay back your equity loan:

Pay back at least 10% at a time
If you want to stay in your home and reduce the equity share that the government owns, you can make part repayments of the government share at any time. The minimum amount you can repay is 10% and this is always based on the current market value of your home – not the original price. Essentially, this means the government will take a share of the profit (or loss) each time you pay back some or all of the equity loan. 

You could clear the equity loan by remortgaging your home. By remortgaging, you’re essentially borrowing more money and taking on more debt, so you need to be sure the repayments are manageable, and you can comfortably afford them. Your lender or new provider might reject your application if they think you’re overstretching yourself financially. Also, if you leave a fixed rate or discounted mortgage early, you might face a costly Early Repayment Charge. 

If you’re considering remortgaging and you have a government equity loan, whether you are increasing the amount you own or not, it’s best to take expert mortgage advice before you go ahead. 

Stay put
As you don’t have to pay off the equity loan until you sell up or come to the end of your mortgage term, you could simply stay put and hold on to the loan. Just remember that you’ll still be charged interest from year six onwards, and the rate will increase each year until the loan is paid back in full. You should also bear in mind that you will need to consider how you will repay the loan if the mortgage ends and you do not sell the house.

What if I want to sell my home?

When you come to sell your property (or when the mortgage is paid off), you’ll have to repay the government the same proportion of the home’s value you borrowed in the first place.
For example:

  • you buy your home for £200,000
  • your government equity loan is 20% (£40,000)
  • you sell your home for £300,000
  • you pay back 20% of the equity loan based on the value of your home when you sell it (£60,000)
  • you will have £40,000 you can use as a deposit for your next home

Are there any changes to the Help to Buy scheme during coronavirus?

As a result of delays caused by the coronavirus pandemic, homebuyers on the old scheme – which ended on 31 March 2021 – were given an extra two months to complete. No more extensions were given so homeowners unable to meet legal completion on 31 May 2021 were unconditionally released from their contract by their homebuilder and their reservation fee refunded.

Find out more about Help to Buy during COVID-19 on the government’s website

Will there be future Help to Buy schemes?

The government recently launched the new Help to Buy: Equity Loan (2021-2023) scheme, which started on 1 April 2021 and is due to end on 31 March 2023.

The new scheme is only available for first-time buyers.

However, the Mortgage Guarantee Scheme, launched on 19 April 2021, is open to both first-time buyers and existing homeowners who can’t afford more than 5% deposit on a mortgage. The scheme has been set up to increase the availability of 95% mortgages, which were taken off the market by most lenders during the COVID-19 pandemic.

There’s also a new scheme coming soon, set to help local first-time buyers and key workers get on the property ladder – but the date has yet to be confirmed. First Homes is specifically aimed at first-time buyers and key workers wanting to buy a home in their local community. Buyers with at least 5% deposit will be able to benefit from a 30%-50% discount compared to the market value of the property.

How do I apply for the new Help to Buy: Equity Loan scheme?

You can start by speaking with a Help to Buy agent in your local area, or a developer who’s registered with the Help to Buy scheme.

Find out more about Help to Buy on the government’s new Own Your Home website.

What else should I consider before getting an Equity Loan?

While the equity loan is a helpful way for first-time buyers to get their foot on the property ladder, it might not be right for everyone. Here are a few things to consider before deciding to apply:

  • interest – the interest you pay from year six onwards is in addition to the loan, so it won’t reduce the amount you owe.
  • property prices – if the market value of your home goes up, so will the amount you owe on your equity loan. If property prices fall and the value of your home goes down, you’ll owe less than the amount you borrowed.
  • It could be more expensive in the long-run – an equity loan can work out cheaper in the short-term because there’s no interest to pay in the first five years. But if you still haven’t paid back your equity loan after 10 years, the interest could end up costing more than a standard mortgage.

Frequently asked questions

Who isn’t eligible for the Help to Buy Equity Loan scheme?

The new Help to Buy: Equity Loan scheme is only available to first-time buyers. The new scheme won’t be available to you if:

  • you already own a home
  • you’ve owned a home in the past in the UK or abroad
  • you’re looking to buy a property that you intend to rent out
  • have had any form of Sharia mortgage (one that meets the requirements of Islamic law)

You’ll only be able to benefit from the Help to Buy scheme if you take out a repayment mortgage. With a repayment mortgage, you pay monthly repayments for an agreed period of time (known as the term) until you’ve paid back the amount you borrowed (the capital), plus interest.

What is a Help to Buy mortgage?

A Help to Buy mortgage is the same as a standard mortgage, offered by participating lenders to buyers on the scheme. The most common types of Help to Buy mortgages are:

  • Fixed rate – you pay a fixed interest rate over a fixed term, usually two or five years. During the fixed period your mortgage repayments will stay the same. This can help with budgeting as you’ll know exactly how much you need to pay each month.
  • Variable rate – your monthly payments can go up or down in line with the Bank of England base rate (tracker) or the lender’s standard variable rate (SVR).

Help to Buy mortgages can only be repayment mortgages. You can’t get a buy-to-let or interest-only mortgage on a Help to Buy scheme.

You’ll need to be registered on the Help to Buy scheme before you can apply for your mortgage. Be aware that the affordability criteria is just the same as a standard mortgage, so your application could be accepted or rejected. Make sure your credit score is up to scratch before you apply.

Your home could be repossessed if you don’t keep up repayments on your mortgage.

What does a Help to Buy agent do?

A Help to Buy agent is there to help you register for the scheme and guide you through the process. Each region has a dedicated Help to Buy agent. They’ll advise you on what options are available and check if you’re eligible and can afford the equity loan. You’ll also need the agent’s authority to go ahead with buying your home.

Does it need to be a new-build home?

Yes. The property you buy needs to be a new-build home that’s never been lived in. You can only reserve a home that’s been built by a homebuilder on the Help to Buy register.

Contact your local Help to Buy agent to find out what properties are available in your area.

How can I build a 5% deposit?

The minimum deposit amount you’ll need is 5%. So, if you’re buying a house valued at £200,000, you’ll need to cough up £10,000.

If you don’t have enough savings, and your parents are willing to help out, they could give you the money in the form of a gifted deposit. You’ll need to tell the lender that it’s a gift and your parents may need to make a statement confirming that you don’t need to pay the money back.

You might also want to consider a government-backed Lifetime ISA. A lifetime ISA is a type of tax-free savings account designed to help people under the age of 40 save up for a deposit on their first home. For every year you save, the government will add a 25% bonus, up to a maximum of £1,000 a year.

Can I put down more than 5% deposit?

Absolutely. If you can manage a bigger deposit, your loan-to-value ratio (LTV) will be lower, so you might get a better interest rate. LTV is the percentage of money you need to borrow in relation to the value of your property. So, if you put down a 30% deposit and your equity loan is 20%, you’ll need a mortgage with a 50% LTV.

How can I find a Help to Buy mortgage?

Taking on a mortgage is a massive financial commitment, even with the help of an equity loan. Once you register with the Help to Buy scheme, it’s a good idea to get advice on Help to Buy mortgages from specialised broker or financial expert.

Our partners London & Country Mortgages Ltd (L&C)** offer fee-free expert mortgage advice. If you’d like to talk about your Help to Buy mortgage options, give them a call on 0808 292 0811.

**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receive a % of commission that our partner London & Country earns from lenders. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

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