Break down the costs of a Help to Buy equity loan, including how interest kicks in from year six and what you'll owe on repayment.
What you paid for the property
20% outside London, up to 40% in London
Minimum 5% of the purchase price
Interest rate on your repayment mortgage
Interest is free for the first 5 years
How much the equity loan rate rises each year from year 6, based on RPI + 1%
What the property is worth now, for working out what you'd owe
Total monthly cost
£1,473.40
Mortgage payment plus equity loan interest
This result is an estimate only and does not constitute financial advice.
Amount owed if repaid today
£66,000
Based on the equity loan share of the current market value
This result is an estimate only and does not constitute financial advice.
Monthly equity loan interest
£91.70
Charged at 1.83% on the original loan amount
This result is an estimate only and does not constitute financial advice.
Monthly mortgage payment
£1,381.70
This result is an estimate only and does not constitute financial advice.
With Help to Buy, you put down at least a 5% deposit and the government lends you up to 20% of the purchase price (40% in London) as an equity loan, interest-free for the first five years. You cover the rest, typically 75% (or 55% in London), with a repayment mortgage.
From year six onwards, you start paying interest on the equity loan, beginning at 1.75% and rising each year after that in line with inflation plus 1%. Because the rate compounds, the interest cost can grow noticeably over time even though the loan amount itself doesn't change.
When you come to repay the equity loan, whether in part or in full, the amount you owe isn't the amount you originally borrowed — it's the same percentage of your property's market value at the time of repayment. If your property has gone up in value, you'll owe more than you borrowed; if it's gone down, you'll owe less.
That's how the scheme was designed — the first five years give buyers time to settle into their mortgage before an additional cost is introduced. From the start of year six, interest begins at 1.75% of the amount you originally borrowed.
From year seven onwards, the interest rate increases annually by the previous year's rate plus RPI (a measure of inflation) plus 1%. Because each year's rise is based on the year before, the rate compounds rather than increasing by a fixed amount — so it's worth checking the actual RPI figure each year rather than relying on an estimate.
You owe a share of the current value, not the amount originally lent to you. The equity loan is expressed as a percentage of your property, so if that percentage of your property's current market value is higher than what you borrowed, because the property has gone up in value, you'll owe more than you originally took out.
Yes — you can usually repay it in part (a minimum of 10% of the current value at a time) or in full at any point. Paying off even part of it reduces the percentage you owe, which lowers both future interest charges and the amount due if the property's value rises further.
Get advice on managing your equity loan, remortgaging, or repaying it early.