The Help to Buy equity loan scheme closed to new applications in October 2022 (with the last purchases completed by March 2023), but hundreds of thousands of homeowners are still living with Help to Buy loans that must eventually be repaid. The scheme provided a Government loan of up to 20% (40% in London) of a new build property's value, interest-free for the first five years. After that, interest accrues at 1.75% per year, rising annually by RPI plus 1% (CPI plus 2% for loans under the 2021 to 2023 scheme). The loan itself must be repaid in full — either when you sell the property, at 25 years from the loan start date, or earlier if you remortgage or pay off the loan voluntarily. With UK house prices having risen substantially since many Help to Buy loans were taken out, many owners are facing significant repayment bills they did not fully anticipate. Our alternatives guide covers newer schemes.
How Help to Buy Repayments Are Calculated
A Help to Buy equity loan is repaid as a percentage of the property's current market value, not the original purchase price. This is the critical feature that makes the loan both an opportunity and a risk. If you bought a property for £250,000 with a 20% Help to Buy loan (£50,000), and the property is now worth £300,000, you repay 20% of £300,000 = £60,000. If property prices fall, you repay less. If they rise significantly, you repay substantially more than you borrowed. The repayment is made to Homes England (or the relevant devolved equivalent), and the process involves a formal valuation by an RICS-qualified surveyor, with all costs borne by the homeowner. Use the official Homes England staircasing and repayment calculator to estimate your current liability.
Interest Charges After Year Five
The loan is interest-free for the first five years. From year six onwards, interest accrues at 1.75% per year on the original loan amount, rising annually by the Retail Price Index (RPI) plus 1%, or the Consumer Prices Index (CPI) plus 2% for loans under the 2021 to 2023 scheme. This means the interest charge increases every year, making it increasingly costly to delay repayment. For a £50,000 loan, the year 6 interest charge would be £875 (1.75% of £50,000). By year 10, after four annual increases, the annual interest would typically be around £1,000-1,100, depending on inflation. The interest is paid monthly and does not reduce the amount you owe, so the loan itself only gets smaller if you repay part of it. This is why many financial advisers recommend repaying the loan as early as possible — every year you delay, the loan becomes more expensive.
- Years 1-5: no interest charged
- Year 6 onwards: 1.75% per year on original loan amount
- Annual increase: RPI + 1% (CPI + 2% for 2021 to 2023 loans) applied to the interest rate
- Interest is added to the loan, increasing total debt over time
Early Repayment Strategies
Paying off a Help to Buy loan early can save tens of thousands of pounds compared to waiting until the 25-year deadline. Options for early repayment include: staircasing in stages — you can buy back the Government's share in increments of at least 10%, reducing the interest-bearing loan each time; remortgaging — using equity in your property to pay off the Help to Buy loan entirely, which may be possible if your property has risen significantly in value; and full repayment on sale — when you sell your property, the loan and all accumulated interest must be repaid from the sale proceeds. Before making any early repayment decision, use the Homes England calculator to understand your current liability, seek independent financial advice, and compare the cost of early repayment against the returns available if you invested the money elsewhere.
- help to buy
- equity loan
- repayment
- first home
- property