HELP TO BUY SCHEME: EQUITY LOAN

How Does the Help to Buy Scheme Work?

The Help to Buy Scheme: Equity Loan is designed to make buying a new-build home more affordable. With this scheme, the government lends you up to 20% of the property’s price (or up to 40% in London). This means you only need a 5% deposit, while the remaining 75% (or 55% in London) comes from a standard mortgage.

One of the biggest benefits? You won’t pay any loan fees on the government’s loan for the first five years. From year six, a small interest fee applies, starting at 1.75% and increasing each year with inflation.

How Repayments Work

When you sell your home or finish repaying your mortgage, you must repay the equity loan as a percentage of the home's current value.

Let’s look at the example above. If you buy a home for £200,000, your mortgage and deposit cover £160,000 (80%), while the government provides a £40,000 (20%) equity loan. If the property later sells for £210,000, you’ll get £168,000 (80%) then repay the Government £42,000 20% of the sales value, rather than the original loan amount.

Who Can Use the Help to Buy Scheme?

• The scheme is only available to first-time buyers.

• It applies to new-build homes only.

• Regional price limits apply, so the property must be within the scheme’s price cap for your area.

• You must plan to live in the home—buy-to-let purchases are not eligible.

The Help to Buy Scheme can be a great way to get on the property ladder with a smaller deposit and lower initial costs. However, it’s important to understand how repayments work in the long term.

Want to know if the scheme is right for you? Get in touch today for expert advice!