Help to Buy Repayment After 5 Years
21/04/2023
(Last Updated: 03/01/2024)
8,137
6 min read
What happens after 5 years of Help to Buy?
- You don't have to pay interest on your Help to Buy Equity Loan for the first 5 years.
- During those 5 years you only pay £1 per month for the management charge.
- From the 6th year, you begin paying interest on the current value of the equity loan, in monthly payments.
- The interest starts at 1.75% annually and increases each year.
- You should aim to repay your Help to Buy loan within ten years, as costs can begin to spiral after that.
- If you are repaying by selling the property, you'll need to meet Target's requirements to get Authority to Complete.
- The Help to Buy administrator has now changed; please liaise with Homes England for customer services on your Help to Buy loan.
How much do I pay back after 5 years of Help to Buy?
After the first 5 years are up, you'll begin paying annual interest at 1.75% on the current loan value, but this interest amount increases each year with inflation. The scheme was designed for buyers to repay all or some of their equity loan (also called staircasing) after 5 years and if you're able to, you can reduce or eliminate your monthly Equity Loan repayments.
How much you pay back after 5 years will depend on what you can afford. Hopefully you've built up some more savings since buying your home. Some homeowners choose to staircase by remortgaging the property against on the equity they have built up by paying off 5 years worth of mortgage payments. As the equity loan is a percentage of the value of the property, the longer you wait to pay it off, the more money it will be worth, assuming an upward trend in property prices.
How long do you have to pay back Help to Buy loan?
You have to pay back your Help to Buy loan within 25 years, or you must repay it from the sale proceeds if you sell the property earlier. At each time you make a repayment, the amount you owe will be calculated based on the percentage you borrowed. If you took out a 20% equity loan, and want to staircase by 10%, you'll have to repay 10% of the property's current value, not half the amount you originally borrowed.
Is it worth paying off Help to Buy early?
It is worth paying off your Help to Buy Equity loan as early as possible, If you have the cash to do so. If you are remortgaging to pay off your equity loan, you'll want to make sure you can afford the new mortgage (your monthly repayments will increase, as you cannot extend the loan term beyond the original 25 years) and that the mortgage rate you can secure is favourable, compared with the current rate of interest on the equity loan (as it will have risen each year after 5 years).
How much do you pay back per month on Help to Buy after 5 years?
The amount you pay back per month on a Help to Buy property are more complex than a usual purchase. You'll have your regular mortgage payments to make, but you'll also be paying off the interest applied to the equity loan portion. The interest itself increases every year after 5 years, but the value of the equity loan that you pay that interest on will increase each month too, as the property's value rises (based on consistent trends). So, each year the rate of interest you pay will increase, and each month the value of that percentage payable will increase too.
An example of how much you could pay back per month on Help to Buy after 5 years
(Based on an estimated RPI %+1)
Interest and management fees on a £40,000 equity loan (outside of London)
Year 6 | £59 |
Year 7 | £63 |
Year 8 | £67 |
Year 9 | £70 |
Year 10 | £75 |
Interest and management fees on a £160,000 equity loan (in London)
Year 6 | £234 |
Year 7 | £249 |
Year 8 | £264 |
Year 9 | £278 |
Year 10 | £296 |
How much do I pay back on my Help to Buy?
The amount you back back on your help to buy will be interest free, if you repay the equity loan after 5 years (no longer). The total amount you pay back will depend on the value of the property at the time.
There is no reliable way to predict how much you will ultimately have to pay back on your help to buy loan. If you borrowed a 20% equity loan, you'll have to repay 20% of the properties current value, when you repay. if you staircase 10%, that may cost significantly less than the remaining 10% when you are finally ready to repay it. The amount you back back on your help to buy depends entirely on how much the property has appreciated, so even more so than with regular loans, the earlier you repay, the better (based on an upward trend in property prices).
The amount you'll pay in total interest also depends on how long it takes you to repay the loan. If you wait until the full 25 year term is up you will find that the total interest paid is considerable. The more the property has appreciated, the more you'll pay in interest.
Have you got a question about Help to Buy repayment after 5 years?
Speak to an experienced SAM Conveyancing Executive, at your standard network rate. We'll talk you through your options.
We have a hand selected panel of:
- Independent Mortgage Brokers for a Help to Buy Remortgage
- Target Compliant RICS Surveyors for your Valuation
- Specialist Help to Buy redemption solicitors
Frequently Asked Questions
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Written by:
Caragh Bailey
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
