UK Help to Buy equity loan model.
Loan repayment at current market value
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Original loan amount
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Your breakdown
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An equity loan is a slice of your home, not a fixed sum
The Help to Buy equity loan closed to new applications in March 2023, but hundreds of thousands of households are still living with one, and the way it is repaid catches people out. You did not borrow a fixed number of pounds. You borrowed a percentage of your home, normally 20 percent across England or 40 percent inside Greater London. When you repay, whether at sale, on remortgage, or by staircasing in chunks, the bill is recalculated against the property's current market value. If your home has gone up, so has the loan. This calculator shows exactly how much that percentage is worth now compared with the day you bought.
What appreciation does to a 20 percent loan
Take the default scenario: you bought at £350,000 with a 20 percent equity loan, so the government originally put in £70,000. Your home is now valued at £420,000. Because the loan tracks the percentage, you owe 20 percent of £420,000, which is £84,000. The house rose £70,000 in value, and the equity loan claimed a fifth of that gain, adding £14,000 to what you must repay.
The interest clock and the fees that follow
For the first five years the equity loan was interest-free, which is why so many buyers treated it as cheap money. From the start of year six an interest fee kicks in at 1.75 percent of the original loan amount, and it then rises each April in line with the Consumer Prices Index plus 2 percent. Note that this fee is charged on the amount you originally borrowed, not the appreciated figure, and paying the fee does not reduce the loan one penny. It is purely the cost of keeping the loan open. This is the point where the maths turns against many households: you are paying a growing annual fee while the capital you owe can also be climbing with the market.
Who should think hard about staircasing now
This tool is for existing Help to Buy borrowers deciding whether to repay early, remortgage, or sell. You can repay in stages of 10 percent or more, known as staircasing, and each stage is priced off a fresh RICS valuation. If you believe your area will keep rising, repaying sooner locks in a lower percentage cost, though you will need to fund it through a remortgage or savings. The most common mistake is forgetting that the lender, currently Homes England, must agree the valuation and that a surveyor's figure, not an estate agent's optimistic appraisal, sets the repayment. A practical tip: get the formal valuation timed for when comparable sales are soft, because the number that counts is the open-market value on the repayment date. If your home has fallen below what you paid, the flip side applies and you could repay less than £70,000, since the loan share shrinks with the value too.
Does paying the monthly interest fee chip away at the loan?
No. The interest fee is a charge for holding the loan, separate from the capital. The only way to clear the equity loan is to repay the percentage of the property value, either in full or by staircasing. Many borrowers find the fee a strong reason to repay rather than let it run.
Can I remortgage while the equity loan is still in place?
Yes, but your choice of lenders narrows because they must accept the equity loan sitting behind their charge, and Homes England has to consent to the new arrangement. Many borrowers use a remortgage specifically to raise the cash to repay the equity loan in one go and escape the rising fee.