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Equity loans – who can get help?

Equity loans are available on certain newly built homes on specific housing developments across England.

The loans are provided through ‘HomeBuy agents’, who will decide if you can buy a home this way. HomeBuy agents are housing associations that have been authorised to run schemes for people who have difficulty buying a home.

You can only buy a home through an equity loan scheme if:

• your household earns £60,000 a year or less
• you can’t otherwise afford to buy a home in your area

A household is the number of people who are buying the home. For example, a household might be you alone or you and your partner.

Equity loans are open to:

• people who rent council or housing association properties
• first-time buyers (you are a first-time buyer if you haven’t owned a home before)

You can also get help through an equity loan if you used to own a home, but can't afford to buy one now.

• Find a HomeBuy agent

How do equity loans work?

With an equity loan, you buy your home with at least 70 per cent of the cost met by a mortgage and savings (deposit).

The remaining cost of the home is paid for by the government and the house builder through an equity loan.

The loan is called an equity loan because its value changes based on how much your home is worth. This means the amount you owe will rise and fall with the value of your home.

The home's title will be in your name, which means you can sell your home at any time.

The government and the house builder will then get the same share of your home’s price when you sell it.

If this home sold for £210,000, you would get £147,000 (70 per cent) and pay back £63,000 on the loan (30 per cent). You would need to pay off your mortgage with your share of the money.

You can read 'Paying back the equity loan' to find out how the sale price of your home is agreed.

If you don't sell your home, you have to pay back the equity loan after 25 years. You can use the link below to find out how the value of the equity loan is worked out if you don’t sell your home.

• Paying back the equity loan

Equity loan fees

You won’t be charged any fees for the first five years of owning your home.

In the sixth year, you will be charged a fee of 1.75 per cent of the loan’s value. Every year after this, the fee will increase. The amount it increases by is worked out by using the Retail Price Index (RPI) plus 1 per cent. The RPI is a way of measuring inflation. Inflation is how much the things we buy increase in cost each year.

For example, if the RPI was 5 per cent, the 1.75 per cent fee would increase by 6 per cent to 1.86 per cent. The table below shows how this can increase your fees.

Fees don't count towards paying back the equity loan.

The National HomeBuy agent collects fees for equity loans. It will contact you before the fees start to set up monthly payments with your bank. It will also send you a statement about your loan each year.

• National HomeBuy agent Opens new window

Paying back the equity loans early - staircasing

If you pay back all or part of the equity loan early, you will pay less in fees and get more money when you sell your home. This is known as staircasing.

If you want to pay back the equity loan early, you will need to contact the National HomeBuy agent. You can read 'Paying back the equity loan' to find out what the costs are.

• Paying back the equity loan

• National HomeBuy agent Opens new window

How to apply for an equity loan

If you'd like to buy a home with an equity loan, contact the HomeBuy agent in the area where you want to live. Each HomeBuy agent has an application form for the scheme, which you will need to complete.

• Find a HomeBuy agent in your area

More useful links

• Buying your home

• Planning for buying a home (money, tax and benefits section)

Useful contacts

• Home and community contacts