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Everything you need to know about the new Help to Buy Equity Loan scheme

Everything you need to know about the new Help to Buy Equity Loan scheme

The Help to Buy scheme has been available to buyers since 2013.

But during that time, the scheme has been through various changes – and 2021 is no different. Here, we’ll explain everything you need to know about Help to Buy equity loans, who is eligible, how you pay them back and how the new scheme is different…

What is a Help to Buy equity loan?

A Help to Buy equity loan sees the government loan you a percentage of your property’s purchase price.

Outside of London, 20% equity loans are available, while Londoners can apply for an equity loan of up to 40% of a property’s purchase price.

Both of those options mean you only need to provide a 5% deposit, with the remaining cost of the property covered by a repayment mortgage.

How the new Help to Buy equity loan scheme works

The new Help to Buy equity loan scheme has been open for applications since December 2020 and buyers will start moving into their new properties from April 1, 2021. The scheme will remain open for applications until March 31, 2023.

Under the scheme, you can apply for an equity loan covering 20% of your property’s purchase price, or 40% if you’re buying in London.

You then put down a 5% deposit and the remaining 75% (55% in London) is covered by a mortgage.

The main differences between the new equity loan scheme and the previous one are:

• The new scheme is only open to first-time buyers

• The maximum purchase price for Help to Buy is now calculated on a regional basis

Help to Buy equity loans are only available on new-build homes from developers who are part of the scheme.

Help to Buy equity loan eligibility

To be eligible for a Help to Buy equity loan, you must:

• Be a first-time buyer, or both be first-time buyers if you’re buying with someone else

• Be buying a home to use as your main residence and not a buy-to-let or second home

• Be buying a new-build property within the maximum price cap for your area

• Be buying with a repayment mortgage

Equity loan regional price caps

Under the previous Help to Buy equity loan scheme, a national maximum price limit of £600,000 was in place.

However, this has been replaced by regional price caps, the figures which are 1.5 times the average first-time buyer price for that region.

The regional price caps are:


Maximum Help to Buy purchase price



North West


Yorkshire & The Humber


East Midlands


West Midlands


East of England


North East


South East


South West


Interest rates on Help to Buy equity loans

Help to Buy equity loans are interest free for the first five years.

From year six, you’ll pay 1.75% in interest, with the interest rate increasing by the Consumer Price Index (CPI) plus 2% each year thereafter.

The interest you pay only covers the interest on the loan and doesn’t contribute to you paying it off.

Help to Buy equity loan repayment

The term of a Help to Buy equity loan is 25 years and it must be paid back by that time, or when you sell your property – whichever comes sooner.

The equity loan is based on a percentage of your property’s value, so if its value increases, the equity loan increases. If its value drops, your equity loan’s value drops, too.

For example, if you purchased a property costing £200,000 with an equity loan of 20%, your loan would be worth £40,000 at the time. If you decide to sell your property four years later and its value has increased to £220,000, your 20% equity loan will now be 20% of that new valuation – £44,000.

However, you can pay off your equity loan at any time, either in full or in 10% increments – although again the price you pay back will be based on the value of your home at the time.

The Help to Buy equity loan scheme in London

In London, Help to Buy equity loans worth up to 40% of a property’s purchase price are available.

That means you would require a 5% deposit and a repayment mortgage would cover the remaining 55%.

Help to Buy properties in London are available up to a maximum purchase price of £600,000.

Help to Buy equity loan pros and cons

There are a host of pros and cons when it comes to Help to Buy equity loans, and these can help you decide if applying for a loan is right for you.

Equity loan pros

• You may be able to buy sooner as you’ll require a smaller deposit

• Your equity loan is interest free for five years, meaning it’s cheaper than a mortgage over that period

• The interest rate from year six is competitive

• The loan-to-value on your property will be 75%, or 55% in London, meaning you may be able to access better mortgage rates

Equity loan cons

• The amount you pay back increases if your property’s value rises

• Equity loans are limited to new-build homes

• Not all lenders offer Help to Buy mortgages

• If your property reduces in value, you could find yourself in negative equity

Further reading…

Looking to buy in London this year? Our guide on where to buy a house in the capital can help.

If you’re a first-time buyer, meanwhile, you may be considering Shared Ownership as an option to get on the property ladder. This guide explains everything you need to know.