Help to buy equity loan mortgage

England’s Help to Buy equity-loan scheme is closed to new applications, but many homeowners still have an equity loan. Help to Buy Wales remains open to eligible new-build purchases, with applications due by 31 March 2027. This guide explains the existing-loan options and the current Welsh purchase route.

What is a Help to Buy equity loan?

The equity loan is secured behind a first-charge repayment mortgage. England’s former scheme could provide up to 20% of the purchase price, or up to 40% in London. A 5% deposit, 20% equity loan and 75% mortgage is a common illustration, not a fixed combination for every borrower. The equity loan is repaid as a percentage of the home’s value, so the sum can rise or fall.

How the equity loan works

The equity loan is a percentage stake, not a fixed sum.

This means:

• If the property value rises, the repayment amount rises
• If the property value falls, the repayment amount falls

Illustrative example Purchase price: £300,000 Equity loan: 20% (£60,000) If property later valued at £350,000, repayment = £70,000 If valued at £270,000, repayment = £54,000

A RICS valuation is required when repaying.

Interest and fees explained

No equity-loan interest is charged for the first five years, although a £1 monthly management fee applies from the start. Interest begins in year six at 1.75% of the original equity-loan amount. Later increases depend on the scheme: RPI (Retail Prices Index) plus 1% for English 2013 to 2021 loans, CPI (Consumer Prices Index) plus 2% for English 2021 to 2023 loans, and CPI plus 2% in the Welsh buyer guide. Administration, valuation and legal fees may also apply.

Mortgage rules and regulation

• The main mortgage is a regulated residential mortgage
• The equity loan ranks second charge behind the mortgage

Mortgage affordability is assessed on:

• Mortgage payment
• Equity loan interest (if applicable)
• Household expenditure and commitments

Not all lenders accept Help to Buy properties for re-mortgage, so lender choice can be restricted.

Selling a Help to Buy property

The outstanding equity loan is normally repaid in full on sale. The scheme calculates its percentage using the higher of the agreed sale price and a scheme-compliant RICS valuation. The conveyancer obtains the redemption figure and deals with the second-charge release.

A RICS valuation is required

A scheme-compliant RICS valuation is required for equity-loan repayment. Its permitted age and the transaction documents depend on the scheme. Arrange the valuation in line with the administrator’s instructions so it is still valid at completion.

Re-mortgaging a Help to Buy property

You can explore a same-lender rate switch, move to a new lender while retaining the equity loan, or remortgage to repay it in part or full. A new-lender move with the loan retained needs administrator consent and legal work to preserve charge priority. English guidance and the Welsh post-completions guide say a same-lender rate switch without extra borrowing does not need a separate administrator application; the Welsh buyer guide conflicts, so check the current Welsh process for that case. Lender loan-to-value and affordability rules vary.

Risks and limitations

The repayment amount may grow if property value rises. Interest, the management fee and transaction costs add to the total cost of keeping or repaying the loan. Moving the debt into a first-charge mortgage can increase mortgage payments. Compare the full costs against the available lender products before deciding.