How do the interest charges on the Help to Buy: Equity Loan scheme work?
Your government loan is interest-free for the first five years. In the sixth year, you’ll have to pay interest at 1.75%. After that the rate increases by 1% more than the Retail Prices Index annually. The interest you pay on your Help to Buy loan doesn’t go towards paying off the loan.
When you come to sell your property (or 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. So, if your Help to Buy loan was for 20% and you sell your home for £300,000, you’ll have to pay back £60,000 (because 20% of £300,000 is £60,000). You can also pay back part or all of your loan at any time.