Help to Buy Equity Loan: How It Works When You Repay
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If you bought through Help to Buy (the equity loan scheme, closed to new applicants since 2023) — you now face the repayment cliff. Here’s how to navigate it.
How Help to Buy Equity Loan Worked
You bought a new-build with:
- 5% your deposit
- 20% (40% in London) government equity loan, interest-free for 5 years
- 75% (55% in London) mortgage
The government took 20% (or 40%) equity in the property.
The Repayment Cliff (Year 5)
After 5 years, you start paying interest on the equity loan:
- Year 6: 1.75%
- Year 7: 1.75% × RPI + 1%
- Year 8 onward: Compounds with inflation
For a £300k London loan (40% equity = £120,000), the 1.75% Year 6 interest is £2,100/year added to your mortgage costs.
Your Three Main Options
1. Repay the equity loan entirely The government’s share of the current value must be repaid (not the original amount).
If your home went from £400k to £500k (25% growth):
- 40% London equity loan was originally £160,000
- Now you owe £200,000 (40% of £500k)
You’d remortgage to fund this repayment.
2. Repay partially (staircase up) You can buy back 10% or 20% chunks of the equity loan. Reduces government share gradually.
3. Keep paying interest Cheapest short-term but expensive long-term as RPI compounds.
The Math People Run Wrong
People assume “the equity loan was at 0% — that was the deal.”
Reality:
- Year 1–5: True, 0% interest
- Year 6+: Interest starts at 1.75% and compounds
- Government equity share grows with property value
A £100k equity loan today, kept 25 years, could cost £400k+ in total contribution to the government when finally repaid.
When to Repay Now (2026)
- You have refinance capacity (your LTV after repayment is reasonable)
- Property values have softened (better repayment cost)
- You’re in the 1.75% RPI window
- Mortgage rates allow affordable refinance
When to Delay
- Property values dropping further would help
- You can’t comfortably remortgage at higher LTV
- Your income hasn’t grown — serviceability tight
Refinancing for Repayment
Steps:
- Get current property valuation (RICS-approved)
- Approach 2-3 mortgage lenders for refinance to fund repayment
- Apply through Help to Buy administrator
- Settle equity loan with refinance proceeds at completion
Many specialist brokers focus on this — worth using one.
Trap: Equity Loan Plus Mortgage Stress
If you’re currently struggling with mortgage payments, adding a fresh remortgage to pay off the equity loan is risky. Better to:
- Negotiate hardship payment plan with HTB administrator
- Sell and downsize if possible
- Get professional financial advice
What If You Sell?
When selling, the equity loan is settled from sale proceeds. You receive: “` Sale price
- Outstanding mortgage
- Equity loan (current value share)
- Selling costs
= Your share “`
If your home grew significantly, the government takes a corresponding share of the gain.
The Inheritance Question
The equity loan must be repaid when you sell or after a certain age (usually 25-year max). It doesn’t transfer to inheritors without repayment.
⚠️ Reality Check: Help to Buy made homes more affordable to buy. The cost compounds at the back end. Plan now for the Year 6+ obligations.
