Equity loans

What do I need to know?

With a Help to Buy equity loan, the government can loan you up to 20 per cent of the cost of your home. You will still need a deposit of at least 5 per cent and you should secure a mortgage for the rest. This scheme is only valid on new builds.

With a government equity loan, you will have to pay back the loan amount when you sell your home or at the end of your mortgage period - whichever comes first.  

Crucial points:

  • Available on new build properties only up to the value of £600,000
  • You’ll need to repay a percentage of the sale price equal to the percentage government loan you take
  • You must repay it when you sell your home or come to the end of your mortgage period (whichever comes first)
  • Available both for first-time buyers or existing homeowners
  • It must be your only property
  • You’ll still need a minimum 5 per cent deposit  

Will I be charged interest on the loan?

The loan is interest free for the first five years. After that, you will be charged a fee of 1.75 per cent of the loan's value, which will increase every year in line with the Retail Price Index plus 1 per cent. You can also pay back some of your equity loan without selling your home. You can pay back either 10 per cent or 20 per cent or the total amount, so long as the loan is worth at least 10 per cent of the value of your home.

Speak to a mortgage adviser to help you find the best solution for your circumstances.