Help to Buy Equity Loan Repayment Rules Explained (2026)
The Help to Buy equity loan scheme closed to new applicants in 2023, but hundreds of thousands of homeowners still owe one. Full repayment, interest and staircasing rules for 2026.
How the Help to Buy equity loan works
Under the Help to Buy scheme (England), first-time buyers of new-build homes could borrow 20% of the purchase price (40% in London) from the government as an equity loan, interest-free for the first five years, on top of a minimum 5% cash deposit and a repayment mortgage for the remainder. While the scheme is now closed to new applicants, hundreds of thousands of existing loans remain outstanding and continue to run under their original terms until repaid, staircased down, or the property is sold.
The interest charge from year 6
From the sixth year of the loan, an interest charge applies to the equity loan. It starts at 1.75% of the original loan amount and increases every year after that by the Retail Prices Index (RPI) plus 1%, compounding. Crucially, the interest is charged on the original cash amount borrowed, even though the repayment amount is based on the current percentage value of your home — two different bases that often confuse borrowers.
Worked example 1: Interest charges over time
Fatima borrowed a £50,000 (20%) equity loan on a £250,000 new-build in year 1.
| Year | Interest rate | Annual interest charge |
|---|---|---|
| Years 1-5 | 0% | £0 |
| Year 6 | 1.75% | £875 |
| Year 7 (assume RPI+1% = 5%) | ~1.84% | £920 |
| Year 10 | ~2.13% | £1,065 |
| Year 15 | ~2.72% | £1,360 |
The interest charge compounds steadily even though Fatima has not borrowed any additional money — it is purely the cost of leaving the original equity loan unpaid, and it continues rising indefinitely until she repays some or all of the loan.
Worked example 2: Repaying based on current value, not original loan
Fatima's home has risen in value from £250,000 to £310,000. Her equity loan percentage remains 20%, but she now owes 20% of the current value, not 20% of the original £250,000.
- Original loan amount: £50,000 (20% of £250,000)
- Repayment amount if redeemed today: 20% × £310,000 = £62,000
Fatima owes £12,000 more than she originally borrowed, purely because her home has appreciated — this is the core mechanic that catches many Help to Buy borrowers by surprise, and it is why waiting to repay in a rising market can be more expensive than expected, even though no cash interest accrued during the interest-free period.
Worked example 3: Partial staircasing repayment
Instead of repaying the full 20%, Fatima decides to staircase down by repaying 10 percentage points, reducing her equity loan from 20% to 10%.
- Repayment required: 10% × £310,000 (current value) = £31,000
- Remaining equity loan: 10% of current value, continuing to accrue interest (from year 6 onwards) on a proportionally reduced original loan basis
- Valuation fee: approximately £300-£400
After this partial repayment, Fatima's future interest charges are roughly halved, since they are based on the remaining outstanding loan percentage, while she retains some flexibility rather than needing the full £62,000 to clear the loan entirely.
Comparing repayment strategies
| Strategy | Upfront cost | Effect on future interest | Best suited to |
|---|---|---|---|
| Do nothing (before year 6) | £0 | None yet — still interest-free | Borrowers within the first 5 years |
| Full repayment | Full current % of value | Eliminates interest entirely | Those who can remortgage or have funds available |
| Partial staircasing | Partial % of value | Proportionally reduces future interest | Those with some funds but not enough to clear in full |
| Wait and pay interest | £0 upfront | Interest keeps compounding, and repayment amount tracks rising property value | Rarely advisable long-term, especially post year 6 |
Should you repay your Help to Buy loan now?
If your equity loan is approaching or past year 5, it is worth reviewing your options before the interest charge kicks in. Many homeowners choose to remortgage — extending their main mortgage borrowing to raise the funds needed to redeem the equity loan in one transaction. Use a Remortgage Calculator to compare your current deal against a larger remortgage that includes funds to clear the Help to Buy loan, and a Mortgage Calculator to check the resulting monthly repayment is affordable.
Remortgage Calculator
Compare your current mortgage deal with a new rate to see monthly savings, total interest saved, and whether remortgaging makes sense.
Open Remortgage calculatorMortgage Calculator
Calculate monthly mortgage payments, total interest, and full repayment cost.
Open Mortgage calculatorPractical steps
- Check which year of your loan you are in — the interest-free window ends after year 5.
- Get a RICS valuation through the Homes England-approved panel before planning any repayment.
- Compare full repayment vs staircasing based on how much you can realistically raise.
- Speak to a mortgage broker about remortgaging to release the funds, particularly if your loan-to-value has improved since your original purchase.
Sources
- gov.uk: Help to Buy: Equity Loan scheme
- Homes England: Help to Buy — paying back your equity loan
- ONS: Retail Prices Index (RPI) data
Frequently asked questions
Try the calculators
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