This article explains the Government’s Help to Build scheme, an initiative to encourage people who want to build their own home and boost the housing sector. It investigates:
- the background to Help to Build
- details of the Help to Build equity loan
- eligibility criteria
- how to apply
- Government aims from the scheme
To find out whether this scheme could help you realise your aim of building a dream home, read on!
Background to Help to Build
While many people in the UK are aspiring self-builders, financing such schemes is fraught with problems. For them, the new Government equity loan initiative, Help to Build, is welcome news; it aims to give self and custom builders the opportunity to build property.
Help to Build, announced in 2021, is a £150 million Government equity loan scheme set up for the next four years to encourage custom and self-builders by reducing the initial cost of the build. Potentially of interest to first-time buyers, those seeking low deposit mortgages and people on lower incomes, Help to Build aims to offer a route onto the property ladder and increase the number of houses being built.
The UK lags behind Europe where self-build homes are a national custom, with serviced plots widely available to give more people a greater choice over what type of house to build. The Help to Build Scheme sets out to invigorate the custom and self-build market by giving UK house buyers and developers similar options to make self-building easier and more affordable. The project applies to custom build homes ordered from a specialist firm as well as to houses built from scratch.
Self and custom build homes have been identified as one route towards alleviating the UK’s housing shortage and the government’s aim is to see better homes being built to people’s specific needs, more quickly and often with energy efficiency a priority. The equity loan scheme is also allocating £2.1 million in funding to help communities decide what sort of development they want and where it should be sited. The plan involves providing good quality serviced land ready for building to start and aims to encourage self-build projects.
Details of the Help to Build scheme
Participants will take out a Government-backed equity loan, similar to that offered through the Help to Buy scheme. This will enable people wanting to build their own home the chance to get a self-build mortgage with smaller deposits – often a 5% deposit rather than the usual required deposit of 20%. The theory is that as less funds are required upfront, more cash is available for the build.
The equity loan can be between 5% to 20% (up to 45% in London) of the total estimated costs of buying the land and building the house. If eligible, participants can spend up to £600,000 to include the cost of the land, with a maximum of £400,000 to be spent on the build cost. On accepting the offer of an equity loan, participants have 3 years to buy the land and build the house. The self-build mortgage pays for the land and set up costs and the mortgage lender will release funds at stages during the build.
On completion of the build, participants get their equity loan and start to pay fees for it; the government pays the mortgage lender the equity loan amount offered and the self-build mortgage will usually revert to a repayment mortgage. The borrower will pay interest on the equity loan from year 6. The payback amount is calculated on the value of your home at the point of sale and the loan must be repaid at the end of the term, normally 25 years.
Applications are open and the scheme will run for four years. More information about building your own home is contained in the Help to Build prospectus which includes a link to register interest.
Eligibility requirements for Help to Build
- participants must be aged 18 or over and have a right to live in England
- they must live in the new home as their only home
- they must secure a self-build mortgage from a lender who is registered with Help to Build
- Homes England will carry out eligibility checks to ensure participants can afford the equity loan based payments
How to apply
- arrange a self build mortgage from a registered lender
- apply to the Help to Build scheme
- on submission of a successful application, an equity loan offer will be made based on the estimated cost of the land and the build cost
- when the house is complete, Homes England will pay the equity loan to the lender
Aims of Help to Build
Announcing the initiative, former Minister of Housing Robert Jenrick said that the Government aims to make building their own home an option for thousands of people who have previously ruled it out.
Help to Build aims to incentivise the self-build market sector and promote the construction of between 30,000 and 40,000 new homes a year: just under 16,000 self-built homes were created in 2020. One of the key aims is to build more and better homes in the UK and give greater customer choice.
A good take-up for the scheme could also increase the amount of affordable housing which is lacking in many local authority areas. The initiative is also aimed at helping the task force of small and medium sized building firms which are ideally placed to grow the custom-build sector, rather than the major building companies.
Is this scheme for you?
If you are keen to build your own home and want to buy a building plot, you will probably need to have ecology surveys carried out before applying for full or outline planning permission. Completing these steps will help you decide if you’ve found the right site before you move on to apply to the Help to Build scheme.
If you have experience of Help to Build, we would love to hear from you. Please leave your comments on our contact page.