Property guides

Help to Buy Equity Loan, England

** The Help to Buy: Equity Loan was a limited scheme which finished at the end of October 2022 **

Help to Buy schemes have been created by the government to assist in the purchase of homes. The main schemes are:

  • Help to Buy: Equity Loans
  • Help to Buy ISA
  • Help to Buy: Shared Ownership

Help to Buy: Equity Loan scheme (2021-2023), England

The Help to Buy Equity Loan is the government’s home-ownership scheme that has been designed to help first-time buyers to get onto the property ladder.

How does the Help to Buy: Equity Loan scheme work in England?

The government offers a loan to first-time buyers that can be put towards the cost of buying a new-build property.

To qualify, you will need to be able to put down at least 5% of the property’s purchase price as a deposit. You can then borrow up to 20% of the market value of the home (or up to 40% if you’re buying in London) in the form of an equity loan from the government. You make up the rest by getting a regular mortgage.

When you sell the property, the loan amount you’ll need to repay will include a share of any capital appreciation that has occurred.

Help to Buy is available for new homes only, which means you will have a lot more choice if you plan to live in a major city with lots of big new-build developments.

Am I eligible?

If you are over 18, have never owned a property (in the UK or abroad), plan to live in the property yourself, and can afford to pay a 5% deposit, along with the relevant fees and interest payments, then you can apply. You must also arrange a repayment mortgage of at least 25% of the purchase price of your new home.

How much can you spend on buying a property?

There are regional price caps on how much you can spend on a property using the Help to Buy: Equity Loan scheme. This ranges from £186,100 in the North East, and up to £600,000 in London.

Maximum price for a home – April 2021 to March 2023

RegionMaximum property price
North East£186,100
North West£224,400
Yorkshire and the Humber£228,100
East Midlands£261,900
West Midlands£255,600
East of England£407,400
South East£437,600
South West£349,000

Are there any fees?

Yes, you will pay a monthly management fee of £1 by Direct Debit. You may also be asked to pay a reservation fee of up to £500, as well as stamp duty tax, legal fees and mortgage fees.

You will also need to factor in service charge fees, so make sure you know what this payment will add to your monthly outgoings.

What happens when I have to start repaying the Help to Buy Equity Loan?

You won’t pay any interest on your equity loan for the first five years. After that, you’ll pay monthly interest at a rate of 1.75% (on top of your mortgage payments).

Interest rates will go up in April by 2% every year, plus the Consumer Price Index (a similar measure to inflation). If the rate of inflation is 0% or less, the interest rate will rise by 2%.

You can pay off all or part of your equity loan at any time. You can make part payments of at least 10% of the full repayment amount, based on what your home is worth at the time, to reduce how much you owe.

Equity loans from Help to Buy normally have a term of 25 years.

What happens when I want to repay my equity loan or simply sell up?

Before putting the property on the market, you’ll need to pay for a survey and valuation to be done by a member of the Royal Institution of Chartered Surveyors RICS). This will then be used to work out how much you need to repay the government.

If you borrowed 20% of the value of the property, you’ll need to repay 20% of its current value, which means that if prices have gone up, you’ll repay more than you originally borrowed.

For example, if you bought a property for £200,000, and by the time you’re ready to repay the loan your home is now worth £250,000, you will need to pay back 20 per cent of that sum, or £50,000 (instead of the £40,000 you borrowed).

If, however, property prices have fallen and the market value of the property is now £175,000, then you would still pay the 20% back, but this would have fallen to £35,000. Once all this is agreed, you are free to sell the property in the normal way.

Unfortunately, the scheme is not available for all new builds. Your first step should be to check whether the developer that is building your property is taking part in the Equity Loan scheme. Most well-known developers are. To apply for an equity loan, find your local agent here.

Help to Buy is available on selected new-build homes, subject to eligibility, terms and conditions

Help to Buy Equity Loan in London – how does it work?

With higher house prices in London, the government has increased the upper limit for the equity loan from 20% to 40% of the property purchase price, which is capped at £600,000.

To summarise, the important bits to remember about the Help to Buy Equity Loan in England are:

  • You must be a first-time buyer to be eligible
  • You will need to be able to pay a minimum deposit of 5%
  • You must occupy the property and it must be your only property

To apply for an equity loan, find your local agent here.

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