The Help to lớn Buy equity loan scheme has helped over 355,000 home buyers on to lớn the property ladder since it was introduced. It’s designed khổng lồ help first-time buyers with a smaller deposit improve their chances of securing a mortgage, but there can be drawbacks of buying a trang chủ this way too.


What is the Help to Buy scheme?

Help khổng lồ Buy is a government scheme designed to help first-time buyers in England buy their first home. The Help to lớn Buy equity loan scheme, to give it its full name, is only available on new-build homes from developers registered with the scheme. There are also regional price limits on the homes that can be bought under the scheme. The final date for applying for a Help to Buy equity loan is 31 October 2022 as the scheme is due to kết thúc on 31 March 2023.

Bạn đang xem: Help to buy: equity loan 2021

A version of the Help to Buy loan scheme is available in Wales with slightly different rules, but there is currently no equivalent if you want to lớn buy a home in Scotland or Northern Ireland.

How does the Help lớn Buy scheme work?

The Help to Buy equity loan scheme in England can help first-time buyers purchase a new-build trang chủ with just a 5% deposit. The government equity loan covers a further amount of the home’s value with buyers then having lớn cover the remainder with a standard repayment mortgage. The equity loan helps as it reduces the form size of the mortgage home buyers need, without having to save a larger deposit.

The kích cỡ of the equity loan available depends on where you live. Throughout England, homebuyers can borrow up to lớn 20% of a home’s value. However, for those looking to lớn buy in London, 40% loans are available, due khổng lồ the higher property prices in the capital.

Interest isn’t charged on the equity loan for the first five years, but in year six you start paying monthly interest equivalent to lớn 1.75% of the equity loan. The interest rate then rises by an amount equal khổng lồ Consumer Price Index (CPI), which is a tool the government uses lớn measure inflation, plus 2% in April each year. The payment only covers the interest, not any of the loan amount.

From the beginning of your loan you will also have khổng lồ pay a management fee of £1 per month.

The equity loan itself can be paid back in full or in part (as long as it covers a minimum 10% of the property value) at any time. You must fully pay back the equity loan if you sell your property, pay off your mortgage or come to the over of the equity loan term, which is typically 25 years. You stop paying interest once the loan is repaid in full.

What were the 2021 changes lớn the Help khổng lồ Buy scheme?

The original Help to lớn Buy equity loan scheme was replaced by a new scheme for 2021-23, after which the scheme is due khổng lồ end. Homebuyers wanting to use the scheme have until 31 October 2022 to lớn reserve a property and apply for an equity loan, a date set to lớn hopefully allow sufficient time for the buying process lớn complete legally ahead of the final scheme over date of 31 March 2023.

Unlike the previous scheme, which was available lớn those taking their first step on to lớn the property ladder và existing homeowners, the 2021-23 Help khổng lồ Buy equity loan scheme is only available to first-time buyers.

In addition, while both versions of the scheme allow applicants to take an equity loan worth up lớn 20% of the property value (or 40% in London), Help lớn Buy 2021-23 introduced regional price caps, limiting how much the house that is being bought can cost. For example, buyers in London can use Help to lớn Buy for new-build house purchases worth up lớn £600,000, while the maximum property value allowed for those buying in the East Midlands is £261,900.


Price cap for Help khổng lồ Buy homes April 2021 khổng lồ March 2023

North East


North West


Yorkshire và The Humber


East Midlands


West Midlands


East of England




South East


South West


What about Scotland, Wales, và Northern Ireland?

Help khổng lồ Buy is available in Wales but the equity loan scheme has slightly different rules.

As in England, homebuyers in Wales who can provide a 5% deposit can get an equity loan that will cover a maximum of 20% of the value of a new-build trang chủ and has a five-year interest-free period. The main differences are that the price cap is mix at £250,000 across all of Wales & the scheme is still available lớn existing homeowners, as well as first-time buyers.

Both Scotland và Northern Ireland have other schemes designed to help those looking to lớn buy a home, but neither currently offers a Help to lớn Buy equity loan scheme.

Forces Help khổng lồ Buy scheme

Armed Forces personnel can borrow up to 1/2 of their annual salary interest-free to put towards a trang chủ deposit. The Forces Help lớn Buy scheme caps loans at 1/2 of service personnel’s annual salary up lớn a maximum of £25,000, which can be repaid over a period of 10 years. Repayments can begin immediately, six months after receiving the loan, or during the final 10 years of service.

Final applications for the scheme must be made by 31 December 2022, after which the scheme is set to lớn end.

» MORE: How the Forces Help to Buy scheme works

The advantages of Help khổng lồ Buy – is it right for me?

Since its launch in 2013, the Help to lớn Buy equity loan scheme has helped over 355,000 homebuyers get a foot on the housing ladder, according to lớn government data published in May 2022. Here are some reasons why Help to lớn Buy might be the right option for you when looking khổng lồ buy your first home.

1. You only need a 5% deposit

Saving a deposit can take years, especially if you want to lớn qualify for a low loan-to-value (LTV) mortgage in order lớn try to lớn access the most competitive deals. With an equity loan, the Help to lớn Buy scheme allows you lớn purchase a home with a smaller mortgage, at a lower LTV, even if you only have a 5% deposit.

2. You may be able khổng lồ access low mortgage rates

Typically, a lower LTV means you can access a wider choice of mortgages và lower interest rates. So whereas a 5% deposit would normally limit you khổng lồ a 95% LTV mortgage, if you use Help to Buy lớn access a 20% equity loan, you can start looking at 75% LTV mortgages, where the rates should be more competitive. If you’re buying in London, where a 40% equity loan is available, an LTV of 55% could mean you’re able lớn access even lower rates. You will need to lớn factor in the cost once the equity loan becomes repayable.

» COMPARE: Mortgages và rates

3. Equity loans are interest-free for five years

With an interest-free loan period of five years, the potential strain of repaying the equity loan at the same time as your mortgage is removed in the short term. The early years of mortgage repayment are usually the toughest, particularly if your career is still developing or you’re raising a family.

Hopefully, this breathing space will allow you to lớn get your finances in order before you need khổng lồ start paying interest on the loan.

Remember, though, that this leaway applies lớn the Help to Buy equity loan only, và you’ll still need to make the monthly repayments on your mortgage.

» MORE: Mortgage repayment calculator

4. Low rate of interest when you start lớn pay

The interest rate of 1.75% that you’ll eventually be charged on an equity loan in year six stacks up well against the best personal loan rates.

That said, with the interest rate then increasing each subsequent year by the rate of CPI inflation plus 2%, be aware that this has the potential to lớn quickly increase.

5. An equity loan can be paid off at any time

You can reduce what you owe at any time by paying off either a proportion of the equity loan, equivalent to at least 10% of the current value of your home, or the entire amount in full.

If you manage to fully repay your loan within five years, you won’t pay any interest at all. However, a £200 administration fee is payable for each part-repayment or when making a full repayment.

The disadvantages of Help to lớn Buy – is it right for me?

Despite its obvious benefits, the Help to Buy equity loan scheme has some potential pitfalls lớn be aware of too. Here are some of the possible disadvantages that homebuyers should consider.

1. The amount you must repay isn’t fixed

Repayments on an equity loan are based on a percentage of your home’s value at the time you want khổng lồ repay. This means the amount you must pay back can change as the housing market và the value of your property fluctuates.

If your home goes up in value, you will need lớn repay more than the government initially loaned you. For example, if you took out a 20% Help lớn Buy equity loan on a property worth £180,000, this loan would be worth £36,000. However, should you want to repay in full, & your house has risen in value to £200,000, you would have to pay back £40,000 (20% of £200,000).

2. Equity loan interest rates can rise fast

After your five-year interest-free period ends, you will pay 1.75% interest in your sixth year of having the loan. This is not unreasonable compared with the rates you might pay on other loans, but by increasing in line with CPI inflation plus 2% each year after, there is the potential for it lớn rise quickly & significantly.

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3. Not all lenders offer Help khổng lồ Buy mortgages

Help to lớn Buy mortgages are not offered by all lenders, so it’s vital to kiểm tra if they do. Bear in mind as well that if a lender does offer Help lớn Buy mortgages, the interest rates & terms might differ from its equivalent standard mortgage products.

Mortgage đơn hàng for Help to lớn Buy are usually more competitive than if you used your 5% deposit khổng lồ take out a 95% LTV mortgage because the equity loan means you effectively have a larger deposit & can borrow at a lower LTV where rates are lower. However, if you were lớn compare a standard 75% LTV mortgage lớn a Help khổng lồ Buy 75% LTV mortgage, you might find the Help khổng lồ Buy mortgage has a slightly higher rate to lớn reflect the added risk that, with an equity loan, you effectively have two loans against the property.

It is always a good idea to shop around for mortgages khổng lồ see whether Help khổng lồ Buy is the most suitable option.

» COMPARE: First-time buyer mortgages

4. Remortgaging can be difficult

Having a Help to Buy equity loan can sometimes make it more difficult to remortgage. This is because there aren’t many Help to lớn Buy remortgage giao dịch to be found and most are only available khổng lồ those who have paid off their equity loan. If you still have your equity loan outstanding, you can usually expect higher remortgage rates & fees.

The Help khổng lồ Buy scheme also charges a flat £115 fee to remortgage, but depending on your lender’s standard variable rate, it could still be worth remortgaging.

5. Help to lớn Buy is only available on new-build homes

If you prefer older architecture, then Help to lớn Buy might not be for you. That’s because the Help to Buy scheme is limited lớn new-build properties, và only to lớn homes built by developers that are taking part in the scheme too. There are Help to Buy agents who can help you find eligible properties in your area.

» MORE: Things lớn consider when buying a new-build

6. You may need permission to make alterations

If you want lớn alter the structure of a property you’re buying using a Help khổng lồ Buy equity loan, you must get permission before proceeding. It’s possible major works will not be approved if you have an outstanding loan because the government would prefer the amount you owe not lớn increase, which could happen if the alterations increase the value of your property. If you don’t get permission, any rise in your home’s market value is added to your equity loan. You don’t need permission khổng lồ redecorate or install a new kitchen or bathroom.

A £50 administration charge is payable when seeking permission.

7. You could fall into negative equity

A House of Lords committee report, published in January 2022, suggested that in areas where help was needed the most, rather than working to support buyers, the Help khổng lồ Buy scheme had inflated house prices so much that buyers would actually have been in a better position had the scheme not been introduced. The Financial Conduct Authority, the financial watchdog, also suggested in 2020 that those using Help to lớn Buy are at greater risk of falling into negative equity if property prices start khổng lồ fall, because the value of new-builds can quickly fall once they’ve been occupied.

Negativity equity is when the market value of a property falls below the amount that is left to repay on a mortgage. But with Help lớn Buy, your equity loan could still be outstanding too. The major problems with negative equity are that it can make it hard to lớn remortgage & represent a significant barrier if you want to sell up & move.

» MORE: Learn about negative equity

8. Price caps can limit your options

You must stay within the price cap for the region in which you wish lớn buy in order to lớn be eligible for Help to lớn Buy, which can restrict the housing options that are available to lớn you. & as the regional boundaries need to lớn be drawn somewhere, there can also be a considerable difference between the caps in two different areas that are not that far away from each other geographically.

Help to Buy scheme pros và cons at a glance

Here is a brief overview of the advantages and disadvantages of the Help to lớn Buy equity loan scheme.



You legally own 100% of the property.

You can buy a home sooner than if you were saving for a bigger deposit.

You only need to save a 5% deposit.

Your equity loan is interest-free for the first five years.

Eligibility doesn’t depend on you having a low household income.

There is the potential lớn access lower mortgage rates.

Help to Buy is only available on new-builds.

You can only purchase properties up to a certain value.

Your equity loan repayments can rise if the value of your home increases.

Your loan could quickly become more expensive after the interest-free period expires.

Not all lenders offer Help lớn Buy mortgages.

There is a potential risk of falling into negative equity.

Remortgaging might not be straightforward.

Permission is needed to make major alterations to your home.

Compare Help to Buy mortgages

If you’re a first-time buyer considering Help lớn Buy as an option, you’ll need to lớn move quickly, as the deadline for applying for the equity loan scheme of 31 October 2022 is fast-approaching.

Finding a suitable repayment mortgage is also crucial if you’re lớn fulfill your home-buying aspiration with the aid of Help to lớn Buy.