Help to Buy Scheme (2021 – 2023)

If you’re a first-time buyer in England, you can apply for a Help to Buy: Equity Loan.

This is a loan from the government that you put towards the cost of buying a newly built home.

You can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.

You must buy your home from a homebuilder registered for Help to Buy: Equity Loan.

Help To Buy

It is an equity loan offered by the government which you use to support your deposit, which is a minimum of 5%. The equity loan is registered as a 2nd charge against your new build property and the maximum term of the loan is 25 years. It is an interest free loan for the first 5 years and you can borrow up to 20% of the purchase price, however this can be up to 40% if you live in London. The remainder will be borrowed from a mortgage lender, on a repayment basis.

The amount you pay for a home depends on where in England you buy it.

Help to Buy: Equity Loan price caps – 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 equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.

The percentage you borrow is based on the market value of your home when you buy it.

You do not pay interest on the equity loan for the first 5 years. You start to pay interest in year 6, on the equity loan amount you borrowed.

The equity loan payments are interest only, so you do not reduce the amount you owe.

You can repay all or part of your equity loan at any time. A part payment must be at least 10% of what your home is worth at the time of repayment.

Paying back the equity loan

When deciding if an equity loan is right for you, it’s important to consider the full cost of your borrowing:

For the first five 5 years:

  • the equity loan is interest free
  • you pay a £1 monthly management fee by Direct Debit

 From year 6:

  • pay the £1 monthly management fee
  • pay monthly interest fee of 1.75% of the equity loan
  • interest rate will rise each year in April by the Consumer Price Index (CPI), plus 2%
  • continue to pay interest until you repay your loan in full

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:

  • at the end of the equity loan term
  • when you pay off your repayment mortgage
  • when you sell your home
  • if you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full

The amount you pay back is worked out as a percentage of the market value at the time you choose to repay.

If the market value of your home rises, so does the amount you owe on your equity loan. And if the value of your home falls, the amount you owe on your equity loan falls too.

As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments

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