Help to Buy equity loans

Equity loans must be repaid in full after 25 years, when your mortgage term finishes, or when you sell your home - whichever happens first.

As the loan is for a percentage of the property price rather than a set cash value, you will repay the market value of the loan at the time, rather than the amount you originally borrowed.

You can also choose to repay part of the loan early in chunks of either 10% or 20% of the total property value.

Help to Buy equity loans are interest-free for the first five years.

From year six, you'll start paying interest at 1.75% of the loan. This rises each year by any increase in the Retail Prices Index (RPI) plus 1%.

In its calculations, the government uses a representative example RPI of 5%, meaning the rate of interest would increase by 6% each year if RPI stayed at that level.

The table below shows representative equity loan interest payments on a £200,000 home with a 20% equity loan (£40,000) outstanding.

If you have a larger equity loan, your monthly interest payments will be higher. The maximum Help to Buy limit was set at £600,000 in London, meaning buyers in the capital could find themselves paying thousands in interest each year.

The table below shows the year six costs for more expensive homes bought using Help to Buy.

If you took out a fixed-rate mortgage on your Help to Buy property, you'll need to consider remortgaging at the end of your term.

Unfortunately, many lenders don't offer Help to Buy remortgaging deals. The vast majority of those that do lend will require you to pay off the equity loan in full, either by taking out a larger mortgage and using some of that cash, or by using the equity you've built up since buying (or any other savings you've gathered).

Paying off the equity loan has strong benefits. You'll be able to enjoy 100% of any future uplift in the property's value, you won't need to pay any more interest on the loan, and you'll have a greater choice of deals next time you remortgage.

If you can't pay off the loan when remortgaging, perhaps due to a lack of growth in the value of the property or a change in personal circumstances, you'll have far fewer options, as only a handful of banks offer deals that allow equity loans to remain outstanding.

First-time buyers with a 5% or 10% deposit can consider getting a low-deposit mortgage.

Taking out a standard mortgage means you won't get assistance from the government, but it also means you won't be limited to buying a new-build home.

The government's First Homes scheme is likely to be the main successor to Help to Buy.

The scheme allows first-time buyers in England to get a 30% discount when buying a new-build home. Councils can set their own eligibility rules (eg limiting properties to local buyers or prioritising key workers).

Shared ownership can help you get on the property ladder in more expensive cities, such as London.

Schemes allow you to buy a share of a property (usually from 25%) from a housing association and pay rent on the remainder.

This allows you to get a foot in the door - but you'll need to do your sums, as the combined cost of your mortgage, rent and service charge can quickly add up. 

Guarantor mortgages allow parents to help their child buy a home by using their property or savings as collateral. 

Find out more in our full guide.