Help to Buy — Is It Worth It?
An honest look at what the scheme actually costs you long term
What Help to Buy Was
The Help to Buy Equity Loan was a UK government scheme that lent first-time buyers up to 20% of a new-build home's value (40% in London) interest-free for the first five years. Buyers needed a minimum 5% deposit, took a standard mortgage for the remainder, and owed the government a percentage of the property's value — not a fixed loan amount.
The scheme closed to new applicants in England in March 2023. If you applied before that date and have an existing equity loan, the details below explain what you owe. If you did not, Help to Buy is no longer available in England (Scotland and Wales had separate versions with different end dates). Alternatives are covered at the end of this chapter.
How the Equity Loan Works
The government lent you a percentage of the purchase price, not a fixed amount. If you bought a £250,000 home with a 20% equity loan, the government's stake is £50,000 — but what you owe them is always 20% of whatever the home is worth at repayment, not £50,000.
If your home rises to £300,000, you owe the government £60,000 (20%). If it falls to £200,000, you owe £40,000. You share in the upside and the downside with the government. This is fundamentally different from a conventional loan.
After the five-year interest-free period, you pay interest at 1.75% of the outstanding equity loan value in year six. This interest rate rises annually by CPI plus 2%. In a period of high inflation, this can increase quickly. The interest is only on the loan, not on the home's value — but the redemption amount (what you pay to repay the loan) is always based on the current home value.
The Redemption Calculation
To repay the equity loan — either when you sell or by voluntary repayment — you must have the home independently valued. You then pay the government their percentage of that valuation. You cannot repay the original cash amount; you repay the percentage stake.
Partial repayments are allowed in minimum 10% chunks of the home's value. If you repay 10% of the equity loan while still owning the home, the government's remaining stake reduces accordingly.
The combination of CPI+2% interest and the percentage-based redemption means the scheme becomes significantly more expensive over time. If you have an active Help to Buy loan, the decision to repay early, extend your mortgage to cover repayment, or sell is worth discussing with a mortgage broker specialising in equity loan redemptions.
Alternatives Now Help to Buy Has Closed
Lifetime ISA: 25% government bonus on up to £4,000/year savings, usable toward a first home up to £450,000. The most direct replacement for first-time buyer support.
Shared Ownership: Buy a 25–75% share of a property and pay rent on the remainder. Over time, you can "staircase" — buy additional shares — toward full ownership. Available on new and existing properties through housing associations.
Mortgage Guarantee Scheme: Allows buyers to get a 95% LTV mortgage (5% deposit) on existing properties up to £600,000. The government guarantees part of the lender's risk, making lenders willing to offer 95% mortgages that they would otherwise avoid.
FAQs
I have a Help to Buy loan — should I repay it early?
It depends on the interest rate you are now paying (year 6+ has rising CPI+2% interest), your home's current value, and your mortgage situation. Many lenders will remortgage to include the equity loan repayment. Speak to a mortgage broker with equity loan redemption experience.
Can I sell my Help to Buy home before repaying the loan?
Yes. The equity loan is repaid from the sale proceeds. Your solicitor handles it. If the property has appreciated significantly, you will owe more than you originally borrowed.
What happens if I cannot afford to repay the equity loan?
The loan remains outstanding and interest accrues. It must be repaid on sale. If the home falls in value below what you owe on the main mortgage plus the equity loan, you could face negative equity. This is rare but possible in falling markets.
Is Shared Ownership a good alternative?
It has advantages (lower deposit, access to more expensive areas) and disadvantages (service charges, leasehold complexity, staircasing costs). It suits people who need to buy in an expensive area and cannot otherwise afford it, but requires careful legal due diligence.
Key takeaways
- Help to Buy closed to new applicants in England in March 2023 — it is no longer available for new purchases.
- Existing equity loans are percentage-based, not fixed amounts — you repay the government's share of the home's current value, not the original loan amount.
- Interest begins in year six at 1.75% rising by CPI+2% annually — this can escalate significantly in high-inflation periods.
- The Lifetime ISA (25% bonus) and Mortgage Guarantee Scheme are the main first-time buyer alternatives.
- If you have an active equity loan, review your repayment options with a specialist mortgage broker.