How do I repay my Help to Buy equity loan?

Full answer

Help to Buy equity loans, though now closed to new buyers, remain in place for many existing homeowners, and understanding the repayment structure is essential given how it links to property value rather than a fixed cash amount. **The interest-free period and fees afterwards** No interest or fees are charged on the equity loan for the first five years of ownership. From year six onwards, an annual fee is charged (this fee itself is not a partial repayment of the loan capital), starting at a set percentage of the original loan amount and rising each subsequent year in line with an inflation-linked formula, meaning the fee grows meaningfully over time even though the underlying capital loan does not reduce on its own. **Why the repayment amount is percentage-based, not fixed cash** Critically, the equity loan is repaid based on the same PERCENTAGE of the property's value that was originally borrowed (commonly 20%, or 40% in London, though schemes and percentages varied over time), applied to the property's CURRENT market value at the time of repayment or sale, not the original cash amount borrowed -- if the property has risen in value, the amount needed to repay the loan rises proportionally too. **Worked example** Someone bought a £200,000 property with a 20% (£40,000) Help to Buy equity loan. Years later, the property is valued at £280,000. Repaying the loan in full requires paying 20% of the CURRENT £280,000 value = £56,000, not the original £40,000 borrowed, even though the loan is described as 'interest-free', because the government's return is tied to the property's value growth, not a fixed interest rate. **Partial repayments (staircasing)** Homeowners can make partial repayments (in minimum percentage chunks, commonly at least 10% of current value at a time) to reduce their equity loan percentage over time, which also reduces the annual fee charged on the remaining percentage from year six onwards. **Repayment on sale** When the property is eventually sold, the equity loan percentage is automatically repaid from the sale proceeds, calculated against the actual sale price achieved, alongside repaying any residential mortgage. **Practical tip** Get a RICS valuation before making a partial or full equity loan repayment, since the amount owed is based on the CURRENT valuation, not what you originally paid, and rising property values mean the pound amount needed to repay grows even though the loan is interest-free.

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