Repaying a Help to Buy equity loan when you sell or remortgage

What a Help to Buy equity loan is

Help to Buy: Equity Loan was a government scheme in England that lent buyers of new build homes part of the price, up to 20% (40% in London), on top of their deposit and mortgage. Loans taken out from April 2021 until the scheme closed in 2023 were for first-time buyers only. The loan is managed for the government by Homes England and secured on your home behind your mortgage.

The key point is that you repay a share of the home's value, not the sum you borrowed. If you borrowed £50,000, which was 20% of a £250,000 price, and the home is now worth £300,000, you repay 20% of £300,000, which is £60,000. If it is worth £230,000, you repay £46,000.

This guide describes England. Wales ran its own Help to Buy scheme with its own rules and administrator.

When the loan has to be repaid

You must repay the whole loan when you sell your home, when you pay off your mortgage, or at the end of the loan term, normally 25 years. You can also repay it early, all at once or in parts. A part repayment must be at least 10% of your home's market value, and you cannot leave less than 5% of the market value to repay.

Many owners repay when they remortgage: for example, by borrowing enough from a new lender to clear the equity loan as well as the old mortgage. Others repay when they sell, from the sale money. Either way, the same steps apply, set out in Homes England's guides on repaying when you sell and repaying when you remortgage.

Interest and fees while the loan runs

The loan is interest-free for the first five years; you pay only a management fee of £1 a month. From the sixth year you pay an interest fee, starting at 1.75% of the amount you originally borrowed and rising each year: by the Retail Prices Index plus 1% for loans taken out from 2013 to 2021, and by the Consumer Prices Index plus 2% for loans from 2021 to 2023.

These interest payments do not reduce the loan. For example, after paying interest for several years on a £50,000 loan, you still owe a 20% share of the home's value when you repay. Homes England's administration fees include £200 to repay all or part of the loan, £115 to remortgage and £115 to change who owns the home.

Step 1: an independent valuation

The amount you repay is set by a valuation from a surveyor you choose and pay for yourself. Homes England's rules on valuing a Help to Buy home say the surveyor must be qualified and registered with the Royal Institution of Chartered Surveyors (RICS), independent of any estate agent and not related to or known to you, and must inspect the inside of the home. The report needs at least three comparable sales from the last 12 months within 2 miles. A mortgage lender's valuation is not accepted.

The report is valid for three months, and must reach Homes England within five working days of being produced. If it runs out before completion, the same surveyor can extend it, provided you ask within two weeks of it expiring. When you sell, you repay the share of whichever is higher: the valuation or the sale price.

Step 2: your conveyancer and the application

Instruct a conveyancer, give them written authority to deal with Homes England for you, and send Homes England its repayment application form with the valuation report and the £200 fee. When selling, include the estate agent's memorandum of sale; when remortgaging, a copy of your new mortgage offer. Any arrears must be cleared, or a payment plan agreed, before the application goes further.

If you are repaying only part of the loan while remortgaging, you need Homes England's permission before you change lender or borrow more. Tell Homes England at the start about anything that could affect the value, such as cladding, a planning breach or building work without approval.

Step 3: the redemption letter and completion

Homes England then sends you and your conveyancer a redemption letter confirming the share you borrowed and an estimate of what you owe, including interest, fees and any arrears. Your conveyancer gives Homes England a legal undertaking, a formal promise to pay the amount due on completion, and Homes England replies with an "Authority to Complete" within five days.

On completion your conveyancer sends the repayment, Homes England checks it against the agreed figure, and it then asks HM Land Registry to remove its charge from your title. If completion moves by more than a week, a new undertaking and a new figure may be needed, so tell your conveyancer about any change of date straight away. If the sale money does not cover everything owed, you must pay the difference.

How long it takes, and what slows it down

Allow several weeks for the Help to Buy steps on top of the usual sale or remortgage work. The most common delays are a valuation that expires before completion, an application sent without the fee or a document, arrears on the loan, and a completion date that moves after the undertaking is given.

For example, if you agree a sale in March and expect to complete in June, a valuation from early March could expire before completion; booking it once the sale is agreed, and asking the surveyor to extend it if needed, keeps the figure current.

Checklist

• Your Help to Buy account number and the date of your loan
• A RICS valuation that meets Homes England's rules, sent within five working days
• The repayment application form and the £200 fee
• Your conveyancer's details and your written authority for them to act
• The memorandum of sale, or your new mortgage offer
• Details of anything affecting the value, such as cladding or building work
• Your management fee and any interest paid up to date

Next steps

Get an instant, itemised quote to sell your home or remortgage, showing the legal fee, VAT and disbursements. If you go ahead, you are introduced to a law firm that confirms its fees in writing before you instruct it, and that deals with you directly from then on. Our guides to selling your home and remortgaging explain the rest of the work.