Help to Buy scheme - everything you need to know

It is now closed to new applications, except in Wales. You could apply to the scheme in England until 31 October 2022 and home purchases must have been completed by 31 March 2023.

Northern Ireland has a different equity-sharing scheme called Co-OwnershipOpens in a new window a not-for-profit organisation to help people become homeowners.

• The equity loan is interest-free for five years.
• From year 6, you’ll be charged 1.75% which will increase by the Consumer Price Index (CPI) plus 2% (1% if you took the equity loan before December 2019).
• The equity loan must be repaid after 25 years, or earlier if you sell your home.
• You must repay the same percentage of the proceeds of the sale as the initial equity loan. So, if you received an equity loan for 20% of the purchase price of your home, you must repay 20% of the proceeds of the future sale. That means if the market value of your home rises, so does the amount you owe on your equity loan. If the value of your home falls, the amount you owe on your equity loan falls too.

When the interest-free period ends, the interest rates charged on your loan will go up each year in April by the Consumer Price Index (CPI), plus 2%.

Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + CPI + 2% (1% if you took the equity loan before December 2019).

You will also pay a £1 monthly management fee by direct debit. When you take out your equity loan, you agree to repay it in full, plus interest and management fees.

The figures above assumes CPI is constant at 2% and no reduction in the loan amount.

From the table, your first interest payment will be 1.75% of the amount you borrowed.

Your interest will go up each year in April by the CPI, plus 2%. This is worked out by multiplying the loan amount (purchase price x equity loan percentage). The equity loan percentage will reduce if any part repayments are made.

The interest rate increases every year by adding CPI plus 2%. The interest rate from the previous year is then used to work out the interest rate rise for the following year.

For example, the following shows how any interest rate increase is calculated assuming CPI remains constant at 2% and no payments are made to pay off the government loan:

1.75% (the rate in year 6) + 0.07% (1.75% x (0.02 CPI + 0.02) = 1.82%

1.83% (the rate in year 7) + 0.07% (1.83% x (0.02 CPI + 0.02) = 1.90%

When you sell your home, or the mortgage is paid off, you have to repay the equity loan plus a share of any increase in the value.

The remaining £50,000 (or more) can be used as a deposit on your next home.

The exact amount depends on how much you’ve paid off your mortgage.

You can also pay back part or all of your loan at any time.

The minimum percentage you can pay back is 10% of the market value of your home.

The amount you pay will depend on the market value at the time.