Homebuyers' guide to the Help to Buy: Equity Loan (2021 to 2023), accessible version
Updated 16 March 2023
Applies to England
© Crown copyright 2023
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide/homebuyers-guide-to-the-help-to-buy-equity-loan-2021-to-2023-accessible-version
1. Your guide to a Help to Buy: Equity Loan
As a first-time buyer searching for a newly built home, you may need a little financial help. With the government’s Help to Buy: Equity Loan scheme, buying your own home could become a reality.
This guide provides useful information about the Help to Buy: Equity Loan (2021 to 2023) scheme, a government home-ownership scheme. It will help you to understand what is involved in taking out an equity loan, how it works and how to apply.
Information in this guide is about how the Help to Buy: Equity Loan scheme (Help to Buy) works for homebuyers in England. Separate schemes are available in Wales and Scotland.
This guide is for information only and must not be considered as advice. Consider seeking independent financial advice about whether Help to Buy is right for you.
2. What is the Help to Buy: Equity Loan scheme?
This is a government scheme for first-time buyers. It provides a loan, called an equity loan, that you put towards the cost of buying a new build.
A new build is a newly built home, including converted commercial premises and conversions of buildings which have never been used as homes.
Properties split into flats do not count as new builds.
Help to Buy cannot be used to buy a home that has been lived in before.
Help to Buy aims to help first-time buyers to get on the property ladder.
If you’re eligible for an equity loan, you can borrow up to 20% (40% if you’re in London) of the market value of a new build.
The market value is:
- the value of the home, as determined by an independent organisation called the Royal Institution of Chartered Surveyors (RICS), or
- the price a home sells for, whichever is higher.
During the term of the equity loan you only pay interest on the amount you borrowed. You do not pay off any of the loan itself. But you can choose to pay all or part of it off at any time. If you sell your home, you will need to pay off all of your equity loan.
You can only apply for an equity loan if you reserve a new build from any of the homebuilders registered with the Help to Buy scheme.
3. Who provides the equity loan?
We, the Homes and Communities Agency (trading as Homes England), provide equity loans. We are a government agency funded by the Department for Levelling Up, Housing and Communities.
4. Key things you should know before taking out a Help to Buy: Equity Loan
Help to Buy is not a discount scheme or a price reduction - the cost of the home will be the same whether or not you get an equity loan.
The equity loan is not interest free. We do not charge interest for the first 5 years, but you will start to pay it from year 6.
The total amount you repay is linked to the value of your home at the time, and not the amount you originally borrowed.
You cannot have an equity loan without having a repayment mortgage in place for the duration of the equity loan.
A mortgage is an amount of money you borrow from a lender to put towards the price of a property. You normally borrow it for a set amount of time and pay back a set amount each month, for an agreed time.
With a repayment mortgage, you make monthly repayments which go towards paying the full amount borrowed (the capital) plus interest. The amount you owe will decrease until you have repaid the mortgage in full by the end of your mortgage term.
5. How does it work?
With an equity loan, we lend you between 5% and 20% (or 40% in London) of the market value of your home.
The amount you can spend on the home depends on where in England you buy it.
5.1 Maximum price for a home - April 2021 to March 2023
| Region | Maximum 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 |
| London | £600,000 |
| South East | £437,600 |
| South West | £349,000 |
The maximum property price is the full purchase price. You cannot change or negotiate this maximum. Your homebuilder will be able to confirm if the home you want to buy is within the price range.
You must:
- pay a deposit of 5% of the purchase price of your new home at exchange of contracts, and
- arrange a repayment mortgage of at least 25% of the purchase price of your new home.
Exchange of contracts is when you and the seller have all the paperwork in place and you legally agree to buy the home. Your agreement to buy is legally binding.
An equity loan is secured against your property in the same way a repayment mortgage is. This means that if you do not keep up with repayments, you may be at risk of losing your home. Equity loans are not regulated by the Financial Conduct Authority (FCA).
5.2 Example of how much your deposit, mortgage and equity loan may be if you buy a new home worth £200,000
- 5% deposit: £10,000
- 20% equity loan: £40,000
- 75% mortgage (repayment mortgage from a lender): £150,000
For the first 5 years:
- the equity loan is interest free, and
- you pay a £1 monthly management fee by Direct Debit.
From year 6:
- you pay the £1 monthly management fee, and
- you pay monthly interest of 1.75% of the equity loan.
You will continue to pay interest until you pay off your loan in full.
The interest rate will rise in April each year based on the rate of inflation at the time (according to the Consumer Price Index), plus 2%. If the rate of inflation is 0% or less, the interest rate will rise by 2%.
We work out interest using the Office for National Statistics current edition dataset - download the spreadsheet and search for Table 20b in the contents list.
5.3 Repaying the loan
You must repay the equity loan in full when you pay off your repayment mortgage, sell your home or reach the end of your loan term, normally 25 years.
You can pay off your equity loan in full, or make part payments, at any time before then.
Any part payment you choose to make on top of a monthly interest payment must be at least 10% of the market value of your home at the time. Part payments will reduce the amount you owe on the equity loan.
5.4 Funding your home purchase
Example of the deposit you pay and what you can borrow.
| Home not in London | Home in London | |
|---|---|---|
| Your deposit | Minimum 5% | Minimum 5% |
| Equity loan | 5% to 20% | 5% to 40% |
| Repayment mortgage | Minimum 25% | Minimum 25% |
5.5 Example of how much your deposit, mortgage and equity loan may be if you buy a new home
Buying anywhere except London - home with a purchase price of £200,000
| Deposit | Minimum 5% | £10,000 |
|---|---|---|
| Equity loan | Minimum 20% | £40,000 |
| Repayment mortgage | Minimum 75% | £150,000 |
Buying in London - home with a purchase price of £600,000
| Deposit | Minimum 5% | £30,000 |
|---|---|---|
| Equity loan | Minimum 40% | £240,000 |
| Repayment mortgage | 55% | £300,000 |
6. Am I eligible?
To be eligible for an equity loan you must be a first-time buyer and buying a new-build home.
You and anyone you’re buying a home with must:
- not own, or have ever owned, a home or residential land in the UK or abroad, and
- not have had any form of Sharia mortgage.
A Sharia mortgage is one that meets the requirements of Sharia (Islamic) law.
7. Quality standards
We aim to make sure that new build homes bought using Help to Buy are of a high standard.
7.1 1. Consumer Code for Home Builders
All our registered homebuilders must meet standards set out within the Consumer Code for Home Builders. Find out more about the code.
7.2 2. New Homes Ombudsman
All our registered homebuilders must sign up to the New Homes Ombudsman scheme, which will launch in 2021. The scheme aims to enforce high standards and compensate homebuyers for poor building work.
7.3 3. Star rating
Registered homebuilders who are members of the Home Builders Federation (HBF) Star Rating scheme must display their star rating on all their marketing materials. The scheme awards homebuilders with stars for customer satisfaction based on homeowner feedback. HBF announce new star ratings every spring.
7.4 4. Building Safety Charter
Registered homebuilders who develop high-rise buildings must sign up to the ‘Building a Safer Future’ Charter. The charter promotes practices which make living and working on new housing developments safer. To find out more, visit their website.
7.5 5. Planning permission and building regulations
Registered homebuilders must keep to building regulations and the conditions of their planning permissions.
7.6 6. New-home warranty
Your homebuilder must give you a new-home warranty before completion.
Completion is the final stage in buying a property, and the point at which you become the owner.
You won’t be able to buy your home until you have a new-home warranty. The warranty will:
- deal with any issues with the design or construction of your home (defects), which your homebuilder is legally responsible for fixing, and
- offer you, us and your mortgage lender protection.
If you have any questions about the new-home warranty, your conveyancer or homebuilder will be able to give you more information.
8. Restrictions on leasehold new builds
If you buy a ‘leasehold’ new build, you own the property, under a lease, for a fixed period. A lease is a legal agreement between you and the freeholder (the person who owns the land the new build stands on) and sets out your and their rights and responsibilities.
Help to Buy can be used for leasehold properties only in rare circumstances.
The government has set out rules to protect you from unfair lease terms and costs when you buy a home. If you are buying a leasehold property, check with your conveyancer that the terms of the lease meet the requirements of Help to Buy. For example, homebuilders are not allowed to charge you ground rent.
9. Applying for an equity loan
9.1 Important points
You will need to arrange a repayment mortgage of at least 25% of the purchase price of your new home. This is separate from the equity loan.
If you are married, in a civil partnership, or living with a partner as if you were married, you will have to make a joint application with your husband, wife, civil partner or partner.
You will need to sign a legal declaration to confirm that you are a first-time buyer. Your conveyancer will explain this to you.
When you buy your home with an equity loan, you must be able to afford the monthly fee and interest payments.
You must tell us if you or anyone you are buying with has a connection with the homebuilder, as this could affect your eligibility for an equity loan.
If you have a large deposit and can get a mortgage without our support, think carefully about whether an equity loan is right for you. Getting independent financial advice could help you make the right choice.
Your deposit is your investment in the house you buy. Please be aware that property values can go down as well as up and you may get back less than you invested.
10. Buying your new home with an equity loan
Before you get started, make sure you have the funds available to pay for:
- a reservation fee of up to £500
- a 5% deposit on exchange of contracts, and
- the rest of your deposit, as well as other fees (stamp duty, legal fees, mortgage fees), at completion.
10.1 Stage 1: Applying
Find your new home
Search online for new homes available to buy using Help to Buy. Look for the Help to Buy logo on homebuilders’ websites.
Reserve your home
Reserve your home with the homebuilder and pay a reservation fee of no more than £500. This fee will be refunded if you’re not approved for an equity loan. Make sure the homebuilder gives you a signed copy of the reservation form. You’ll need it when you apply for the equity loan.
Get financial advice
Buying a new home can be daunting, but there are many organisations that offer free advice. Consider getting independent financial advice.
Apply for your equity loan
If you’re eligible for an equity loan and can afford the monthly fee and interest payments on top of your other outgoings, your Help to Buy agent will help you apply for the equity loan.
You will need to fill in a Property Information Form to provide personal and financial information, such as your income and details of the property, your proposed repayment mortgage and your deposit. You can get a Property Information Form from your Help to Buy agent.
The information you provide must be true. Providing false information will lead to delays and could be considered to be fraud, which is a criminal offence.
Send your signed Property Information Form and a copy of the signed reservation form to your Help to Buy agent.
10.2 Stage 2: Authority to Proceed
Get Authority to Proceed
If your application is approved, your Help to Buy agent will give you an Authority to Proceed. This is an official document which means you’re eligible for the scheme and can progress with buying your home.
Once you have the Authority to Proceed, your conveyancer will give you legal guidance and forms for you to fill in. Return these, along with the Authority to Proceed, to the Help to Buy agent.
The Authority to Proceed is valid for 3 months. If it expires you will need to make another application for an equity loan.
Apply for a repayment mortgage
You are responsible for arranging your repayment mortgage. Do not apply for the mortgage until you have the Authority to Proceed. If you apply for a repayment mortgage before then and are not eligible for an equity loan, you may lose money. Your credit rating may also be affected.
Your repayment mortgage should be less than 4.5 times your annual income (before tax).
If your home is worth less than when you bought it, it may affect your ability to pay off your repayment mortgage. Consider talking to a financial adviser about what you could do if this happens.
Your home could be at risk if you do not keep up with repayments on your mortgage.
10.3 Stage 3: Exchange of contracts
When you have the Authority to Proceed, your conveyancer will receive necessary legal information and forms for you to fill in and send to your Help to Buy agent.
Your conveyancer will do the following:
- explain the equity loan contract and your legal responsibilities. They will remind you that your application must have been accurate and true, and give you the opportunity to correct any issues. Giving false or misleading information could be fraud. This is a criminal offence and you may have to repay the equity loan in full.
- ask you to sign the sale contract, the equity loan contract, and a declaration to confirm that you and anyone you’re buying with are first-time buyers.
- make sure your mortgage offer, the property price and your deposit are the same as shown in the Authority to Proceed
- ask your Help to Buy agent for permission to exchange contracts.
Your Help to Buy agent will do the following:
Check all the paperwork is correct and send your conveyancer an Authority to Exchange so they can go ahead with exchanging contracts.
You must do the following:
Pay at least 5% your deposit.
When contracts are exchanged, you will be legally bound to buy your new home, usually by an agreed date (the completion date). You should speak to your conveyancer about making sure your repayment mortgage offer does not end before the completion date.
Once you have exchanged contracts you may have to pay costs if you change your mind about buying the home.
Home visits
You can visit your new home once you have exchanged contracts. Your homebuilder will arrange this for you. This will give you a chance to confirm any last-minute details or changes before you move in. Speak to your conveyancer or your homebuilder for more information about home visits.
Cancellation
If you decide before exchanging contracts, that you no longer require Help to Buy, you can withdraw your application. You will need to let your Help to Buy agent know as soon as possible. Your homebuilder will refund any reservation fee you have paid. However, you may still need to pay other fees, such as your surveyor’s and conveyancer’s fees.
10.4 Stage 4: Completion
At completion:
- you pay the rest of your deposit (if your deposit is more than 5%)
- your lender pays the homebuilder the full amount of the repayment mortgage
- we pay your equity loan to the homebuilder, and
- you legally own your new home and can move in.
Your conveyancer will register a legal charge on your home for us. They will also register a separate legal charge for your mortgage lender.
An equity loan is secured against your property in the same way a repayment mortgage is. This means that if you do not keep up with repayments, you may be at risk of losing your home.
The legal charges will be recorded with HM Land Registry and will be shown on the title deeds (ownership documents) for your home. The legal charges will not be removed until you have paid off your equity loan and your repayment mortgage.
Your home may be repossessed if you do not keep up repayments on your repayment mortgage, equity loan or other loans secured against your home. Consider getting independent financial advice before making any financial decisions.
11. Equity loan administrator
After completion, your Help to Buy agent will pass your details to our equity loan administrator. They will:
- set up your Direct Debit to pay the £1 monthly management fee
- arrange for you to pay fees and interest payments on your equity loan (after the first 5 years)
- help you if you want to pay off some or all of your equity loan
- help you if you want to make changes to your equity loan account.
12. How long does it take to buy a new home with an equity loan?
When you get the Authority to Proceed you have 3 months to exchange contracts.
You must complete buying your home within 6 months of exchanging contracts.
Once you have exchanged contracts, you may have to pay costs if you change your mind about buying the home.
13. Repaying your equity loan
When you take out your equity loan, you agree to repay it in full, plus interest and management fees.
You must repay your equity loan in full when any one of the following happens:
- the equity loan term ends
- you pay off your repayment mortgage
- you sell your home
- we ask you to repay the loan in full (if you have not kept to the conditions of the equity loan contract).
You cannot make regular monthly payments towards paying off the equity loan. However, you can pay off all of your equity loan, or make part payments, at any time. If you want to do this, contact the equity loan administrator.
13.1 You may pay back more than you borrow
The amount you borrow is based on the market value of your new home when you buy it.
When you repay some or all of your equity loan, the amount you pay is worked out as a percentage of the market value at that time.
If the market value of your home increases, so does the amount you have to repay. And if the value of your home falls, the amount you have to pay also falls.
13.2 Work out what you need to repay
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.
For you to make a payment, we need to know the current market value of your home. You will need to get a Royal Institution of Chartered Surveyors (RICS) valuation report from a qualified surveyor who has estimated the value of your home, based on its condition and the current housing market.
If you are repaying the full equity loan after selling your home, the amount you pay will be based on:
- the market value of your home, as set out in a RICS valuation report, or
- the price you sold the home for, whichever is higher.
14. Understanding your interest payments
Interest is what we charge for lending you the funds to help you buy your Help to Buy home.
Interest payments do not go towards paying off your equity loan.
You start to pay interest from year 6, on the fifth anniversary that you took out your equity loan.
Your first interest payment will be 1.75% of the equity loan amount you borrowed.
Your interest will go up each year in April by the Consumer Price Index (CPI), plus 2%.
The amount of monthly interest you pay is worked out by multiplying:
- the Help to Buy: Equity Loan amount (purchase price x equity loan percentage). The equity loan percentage will reduce following any part repayment
- by the interest rate (in the first year this is 1.75% of the equity loan amount you borrowed). The interest rate increases every year by adding CPI plus 2%. The interest rate from the previous year is then used to work out the interest rate rise for the following year.
We work out monthly interest payments using this sum:
Help to Buy: Equity Loan amount x interest rate ÷ 12
£300k purchase price and equity loan of £60,000 (20% equity loan percentage)
(300,000 x 20%) x 1.75% = £1,050 (per annum) ÷ 12 = £87.50 per month
14.1 How we work out interest rate increases
Interest rates go up each year in April by the Consumer Price Index (CPI), plus 2%. The table below shows how the interest rate rise is
worked out.
| Year | Interest rate increase calculation | Interest rate |
|---|---|---|
| 1 - 5 | No interest payments | 0% |
| 6 | Not applicable | 1.75% |
| 7 | 1.75% (year 6 rate) + 0.08% (1.75% x (2.5% CPI + 2%) | 1.83% |
| 8 | 1.83% (year 7 rate) + 0.08% (1.83% x (2.5% CPI + 2%) | 1.91% |
Payments are worked out as an annual figure and then divided by 12 equal instalments to get a monthly interest payment.
Based on the yearly interest rate rises, it is possible to show the typical annual and monthly payments, including interest and management fees. You will receive a personalised example which estimates the fees you’ll pay on your equity loan. The figures used below are examples only.
Table 1: Typical annual and monthly payments, including interest and management fees, based on an equity loan in a region of £40,000 and inflation (CPI) of 2.5%:
If the market value of your home at the time of purchase was £200,000 and you borrowed a Help to Buy: Equity Loan amount of £40,000 (20%), in year 6, on the fifth anniversary of taking out your equity loan, the interest rate used to work out your monthly interest fee would be 1.75%.
So the sum is:
(£40,000 x 1.75%) ÷ 12 = £58.33 interest every month in year 6.
| Fees and interest | Annual payments | Monthly payments |
|---|---|---|
| Year 1 to 5 | ||
| No interest payments | £0 | £0 |
| Management fee | £12.00 | £1 |
| Year 6 | ||
| 1.75% | £700.00 | £58.33 |
| Management fee | £12.00 | £1 |
| Year 7 | ||
| 1.83% | £732.00 | £61.00 |
| Management fee | £12.00 | £1 |
| Year 8 | ||
| 1.91% | £764.00 | £63.67 |
| Management fee | £12.00 | £1 |
Table 2: Typical annual and monthly payments, including interest and management fees, based on an equity loan in London of £240,000 and inflation (CPI) of 2.5%:
If the market value of the home at the time of purchase was £600,000 and you borrowed a Help to Buy: Equity Loan amount of £240,000 (40%), in year 6, on the fifth anniversary of taking out your equity loan, the interest rate used to work out your monthly interest fee would be 1.75%.
So the sum is:
(£240,000 x 1.75%) ÷ 12 = £350.00 interest every month in year 6.
| Fees and interest | Annual payments | Monthly payments |
|---|---|---|
| Year 1 to 5 | ||
| No interest payments | £0 | £0 |
| Management fee | £12.00 | £1 |
| Year 6 | ||
| 1.75% | £4,200.00 | £350.00 |
| Management fee | £12.00 | £1 |
| Year 7 | ||
| 1.83% | £4,392.00 | £366.00 |
| Management fee | £12.00 | £1 |
| Year 8 | ||
| 1.91% | £4,584.00 | £382.00 |
| Management fee | £12.00 | £1 |
14.2 Differences in interest payments
You will pay slightly less interest if you take out an equity loan at the start of the year, and slightly more interest if you take it out later.
Your interest payments start in year 6, on the fifth anniversary of your equity loan being paid to the homebuilder.
If the fifth anniversary is between 1 April and 31 December, the first interest rate rise will be the following April. For example, if your equity loan was paid to the homebuilder on 1 June 2022, interest payments would start on 1 June 2027 (the fifth anniversary and the start of year 6) and the interest rate would increase in April 2028. This means your interest would rise in less than 12 months, so you would pay more interest overall.
If the fifth anniversary is between 1 January and 31 March, the first interest rate rise will be in April of the following year. For example, if your equity loan was paid to the homebuilder on 1 January 2022, interest payments would start on 1 January 2027 (the fifth anniversary and the start of year 6) and the interest rate would increase in April 2028. This means you would pay a lower rate of interest for slightly longer.
15. Equity loan fees and other costs
When you apply for an equity loan you agree to pay interest and other fees and costs. These include the following:
- a monthly management fee - when your equity loan starts you must pay a £1 monthly fee until you’ve paid off the full equity loan
- administration fees - if you make changes to your equity loan, such as making a part payment
- cost for a late payment - we may charge interest on overdue amounts you owe to us every day until you pay what is owed in full
- other reasonable costs - if we need to take action against you for the money that is owed to us
15.1 How we collect fees
We collect interest and management fee payments by Direct Debit. This helps to keep your payment details up to date. The payments are managed by our equity loan administrator.
15.2 Other monthly costs
Typically, you’ll also need to consider other payments to your property such as mortgage repayments, insurance costs and utility bills.
16. Equity loans and repayment mortgages
Equity loans from Help to Buy normally have a term of 25 years. If you choose to remortgage (by switching your mortgage to a different lender or switching to a different mortgage deal with your current lender), you will need to get our permission first.
You may want to switch mortgage deal without borrowing more, and we would usually allow this.
If you want to borrow more we will only consider agreeing to this if you use the extra money to:
- pay off all or part of your equity loan
- pay for structural alterations that need to be made to your home for medical reasons
- pay to remove or add a homebuyer to the equity loan agreement (see the next section) or
- pay for other personal circumstances that you agree with us.
If your new mortgage deal is for more than 25 years, we will extend the term of your equity loan to match it.
Consider getting independent financial advice to make sure you understand how a new mortgage deal may affect your equity loan and the interest payments.
16.1 Add and remove homebuyers from the equity loan
If we give our permission, you can add or remove a homebuyer from the equity loan contract. This is known as a ‘Transfer of Equity’. At least one of the homebuyers named in the equity loan contract must stay the same, and not be removed, throughout the term of the equity loan.
Homebuyers who are added to the equity loan contract must meet the Help to Buy eligibility criteria.
Read more about changing ownership of to your Help to Buy home.
17. Structural alterations
You cannot make structural alterations to your home, such as adding an extension or converting a bedroom into a bathroom, without our permission.
We will only give permission for structural alterations that are needed for medical reasons.
Structural alterations can increase the market value of your home, and your equity loan is linked to the value of your home.
- If you make structural alterations without our permission, and they increase the value of your home, the equity loan amount you owe will increase.
- If we give you permission to make structural alterations, and they increase the value of your home, when we work out how much you owe on your equity loan we will ignore the increase in value relating to the alteration.
Redecorating or fitting a new kitchen or bathroom is not a structural alteration, and you do not need our permission for this.
You have the option of paying off your equity loan before you make structural alterations.
Read more about making structural alterations.
18. Other restrictions
You are not allowed to sublet your home (move out and rent the whole property out to someone else) without our consent.
You must have building insurance for your home, keep your home in a good state of repair and keep to all other conditions of the insurance policy.
You cannot sell your home or pay off your mortgage without repaying the equity loan in full.
19. Changes in the housing market could affect your property price
House prices can go up and down. As your equity loan is linked to the market value of your home, any change in property prices can affect the amount you have to repay.
Examples 1 and 2 below show what could happen if property prices increase.
19.1 Example 1 – Increase in property price of a Help to Buy home outside London
- Price the property was bought for: £200,000
- Deposit paid by the buyer: £10,000
- Equity loan: £40,000 (20% of purchase price)
- Repayment mortgage: £150,000
The table below shows the amount of equity loan that would have to be repaid when the property was sold if property prices had increased by 2% every year.
| Year | Market value | Increase in property price | Equity loan that would need to be repaid (20% of market value) |
|---|---|---|---|
| 1 | £200,000 | - | £40,000 |
| 2 | £204,000 | 2% | £40,800 |
| 3 | £208,080 | 2% | £41,616 |
| 4 | £212,242 | 2% | £42,448 |
| 5 | £216,486 | 2% | £43,297 |
| 6 | £220,816 | 2% | £44,163 |
19.2 Example 2 – increase in property price of a Help to Buy home in London
- Price the property was bought for: £400,000
- Deposit paid by the buyer: £20,000
- Equity loan: £160,000 (40% of purchase price)
- Repayment mortgage: £220,000
The table below shows the amount of equity loan that would have to be repaid when the property was sold if property prices had increased by 2% every year.
| Year | Market value | Increase in property price | Equity loan that would need to be repaid (40% of market value) |
|---|---|---|---|
| 1 | £400,000 | - | £160,000 |
| 2 | £408,000 | 2% | £163,200 |
| 3 | £416,160 | 2% | £166,464 |
| 4 | £424,483 | 2% | £169,793 |
| 5 | £432,973 | 2% | £173,189 |
| 6 | £441,632 | 2% | £176,653 |
Examples 3 and 4 below show what could happen if property prices fall.
19.3 Example 3 - decrease in property price of a Help to Buy home outside London
- Price the property was bought for: £200,000
- Deposit paid by the buyer: £10,000
- Equity loan: £40,000 (20% of purchase price)
- Repayment mortgage: £150,000
The table below shows the amount of equity loan that would have to be repaid when the property was sold if property prices had fallen by 5% every year.
| Year | Market value | Drop in property prices | Equity loan that would need to be repaid (20% of market value) |
|---|---|---|---|
| 1 | £200,000 | - | £40,000 |
| 2 | £190,000 | -5% | £38,000 |
| 3 | £180,500 | -5% | £36,100 |
| 4 | £171,475 | -5% | £34,295 |
| 5 | £162,901 | -5% | £32,580 |
| 6 | £154,756 | -5% | £30,951 |
As the value of your home in this example is less than when you bought it, it may affect your ability to pay off your repayment mortgage and the equity loan.
19.4 Example 4 – decrease in property price of a Help to Buy home in London
- Price the property was bought for: £400,000
- Deposit paid by the buyer: £20,000
- Equity loan: £160,000 (40% of purchase price)
- Repayment mortgage: £220,000
The table below shows the amount of equity loan that would have to be repaid when the property was sold if property prices had fallen by 5% every year.
| Year | Market value | Drop in property prices | Equity loan that would need to be repaid (40% of market value) |
|---|---|---|---|
| 1 | £400,000 | - | £160,000 |
| 2 | £380,000 | -5% | £152,000 |
| 3 | £361,000 | -5% | £144,400 |
| 4 | £342,950 | -5% | £137,180 |
| 5 | £325,803 | -5% | £130,321 |
| 6 | £309,512 | -5% | £123,805 |
As the value of your home in this example is less than when you bought it, it may affect your ability to pay off your repayment mortgage and the equity loan.
If you would like this guide in an accessible format (for example, in large print or Braille, or as an audio version), please email: enquiries@homesengland.gov.uk
This guide is for information only and must not be considered advice. Consider getting independent financial advice before making any financial decisions on whether Help to Buy: Equity Loan is right for you.
Your home may be repossessed if you do not keep up repayments on your mortgage, equity loan and other loans secured against it.