How Help to Buy Works
A plain English guide to your equity loan — how interest is calculated, why it escalates, and what your options are.
How the equity loan works
When you bought your home through Help to Buy, the government lent you between 20% and 40% of the purchase price as an equity loan. This isn't a fixed amount — it's a percentage of your property's value.
If your property goes up in value, the amount you owe goes up too. If you bought at £300,000 with a 20% equity loan (£60,000) and your home is now worth £350,000, you'd owe 20% of £350,000 = £70,000 to redeem.
The equity loan runs alongside your main mortgage. You make interest payments on the equity loan separately — on top of your normal mortgage payments.
How interest is calculated and why it escalates
For the first five years, the equity loan is interest-free (you just pay a £1/month management fee). From year 6, interest kicks in at 1.75% of the original loan amount.
After that, the rate increases every April. The formula depends on when you completed:
- Completed before April 2021: Rate increases by the Retail Price Index (RPI) + 1% each year
- Completed April 2021 onwards: Rate increases by the Consumer Price Index (CPI) + 2% each year
The rate always goes up — even when inflation is zero, the +1% or +2% adjustment guarantees an increase. This is the bit that catches people out: what starts as a manageable payment compounds into something much larger over time. Read our full interest guide →
Worked example: £200,000 purchase, 20% equity loan (£40,000), pre-2021, RPI at 3.5%
| Year | Rate | Monthly | Annual | Cumulative |
|---|---|---|---|---|
| 6 | 1.75% | £58 | £700 | £700 |
| 7 | ~1.83% | £61 | £732 | £1,432 |
| 8 | ~1.91% | £64 | £766 | £2,198 |
| 9 | ~2.00% | £67 | £800 | £2,998 |
| 10 | ~2.09% | £70 | £836 | £3,834 |
| 11 | ~2.18% | £73 | £874 | £4,708 |
| 12 | ~2.28% | £76 | £914 | £5,622 |
| 13 | ~2.39% | £80 | £956 | £6,578 |
| 14 | ~2.50% | £83 | £1,000 | £7,578 |
| 15 | ~2.61% | £87 | £1,046 | £8,624 |
After 10 years of paying interest, you'd have paid over £8,600 — and the rate keeps climbing.See your own numbers →
Your four options
1. Keep paying
Do nothing and continue making escalating interest payments. This costs the most long-term but requires no upfront money. Interest payments don't reduce your equity loan balance — they're pure cost.
2. Remortgage to redeem
Remortgage your property to raise enough to pay off the equity loan entirely. You end up with one larger mortgage but no more HTB interest. This is usually the best option if you have enough equity and income to qualify for the higher mortgage. Full remortgaging guide →
3. Partial staircasing
Pay off a minimum of 10% of your property's current value to reduce the equity loan percentage. This lowers your ongoing interest but doesn't eliminate it. Useful if you can't afford full redemption yet. Staircasing guide →
4. Sell the property
When you sell, the equity loan is repaid from the sale proceeds at the current percentage of the property's market value. If you bought with a 20% loan, 20% of the sale price goes back to the government. Selling guide →
The redemption process step by step
If you decide to pay off your equity loan (whether through remortgaging or savings), here's what happens:
- Get a RICS valuation — You'll need a Royal Institution of Chartered Surveyors (RICS) valuation of your property. This determines how much you owe. Cost: roughly £300-600.
- Apply to your administrator — Contact Lenvi (formerly Target Servicing) or your equity loan administrator with the valuation. They'll issue a redemption figure.
- Source of funds certificate — If remortgaging, your mortgage lender provides a certificate confirming they'll fund the redemption.
- Solicitor work — Your solicitor handles the legal process, including removing the equity loan charge from your property title.
- Completion — Funds are transferred, the equity loan is discharged, and you own your home free of the HTB charge.
Typical timeline: 3-6 months. Lenvi are notoriously slow to respond, so start early and be persistent.
Common gotchas
- Valuations expire after 3 months — If the process takes longer, you may need to pay for a second valuation. Factor this into your timeline.
- Lenvi can be very slow — Response times of 4-8 weeks are common. Chase them regularly and keep written records.
- Admin fees — Homes England charges around £200 for processing. Your solicitor and valuer are separate costs on top.
- Property value changes affect your bill — If your property has increased in value, you owe more than the original loan amount. Check your current value before starting.
- Negative equity — If your property is worth less than you paid, the equity loan value is lower too, but you may struggle to remortgage.
- Early repayment charges on your mortgage — If you're on a fixed rate, check whether remortgaging triggers an ERC on your existing deal.
Want to talk through your options with a Help to Buy specialist?
Book a free, no-obligation consultation with an FCA-authorised mortgage adviser who specialises in Help to Buy redemptions.
Get in touch