Can Help to Build Help Me?

Posted by The Landsite on 24th October 2022 -

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Building your own home is something most people would consider beyond their reach. But the new government equity Help to Build scheme has been created to make building your own home a real possibility, even if you have limited savings.

The government expects Help to Build to help more people get onto the property ladder, predicting that between 30,000 and 40,000 self build homes could be built every year under the scheme. That's a significant increase from previous years; in 2021, only 13,000 self build homes were built, according to the National Custom and Self Build Association (NaCSBA).

It's an opportunity worth considering. Research by NaCSBA and property portal Zoopla found that under Help to Build, a joint income of £40,000 would be enough to gain sufficient finance for a three-bed house in a third of England's areas.

Here's our overview of the scheme to help you decide whether it could work for you.

What is Help to Build?

Help to Build allows for low-deposit mortgages through equity loans on self and custom build homes. The minimum deposit of 5% is considerably less than the standard self build mortgage requirement of around 15%.

How much can I borrow?

The Help to Build scheme boosts your deposit with a government-backed equity loan of up to 20% (40% in London) of the total estimated cost to buy a plot of land and build the home.

You will need a deposit of at least 5% and a 95% self build mortgage, based on the estimated costs, from a registered Help to Build lender.

The build cost is capped at £400,000, and your total budget for land and build is £600,000.

What can I do under Help to Build?

Help to Build equity loans are available for self build, custom build and conversion projects. You can only use the loan to build one home, which must also be your primary home, and you cannot renovate a house you already own. Projects must also be completed within three years.

You can build on land you already own or register with your local authority to find service plots available for development. Your land will need to have outline planning permission that meets legal and mortgage lender criteria.

A custom or self build home means you can decide on your home's design, internal layout and location.

· Custom build homes are where you work with a developer to design the home's build, specifications and layout to meet your personal needs. They are likely to be on a plot of land in a housing development built specifically for custom build.

· Self build homes are where you create your own individual home; handling every stage of the project from buying the land to working with architects to purchasing building materials.

· Shell homes are bought as watertight 'shells' – with walls, roof and windows, but they are unfinished internally. You are responsible for everything from first fix, which includes plumbing and electrics.

Under Help to Build, you can also convert commercial property to residential and build a new flat in an unused space above an existing build

Housing Minister Rt Hon Stuart Andrew MP: "Through the Help to Build scheme, we will help thousands more people onto the property ladder by giving them the opportunity to build homes that are perfectly tailored to their needs and in the communities they want to live in".

How does it work?

Your self build mortgage covers the cost of buying the land and building your home.

Once your build is complete, your mortgage lender will switch you to a repayment mortgage.

The government will pay your equity loan to your mortgage lender to reduce the amount you need to borrow on a repayment mortgage.

For the first five years, the Help to Build equity loan is interest-free, asides from a management fee of £1 per month until the loan is repaid. You will only start to pay interest on the loan from year six, starting at 1.75%, and rising by a minimum of 2% plus CPI (consumer price index) from year seven onwards.

If the value of your property changes, so will the amount you owe. The total amount you repay is based on the market value of your property (land and house value) at the time you repay, not when you borrowed.

The equity loan must be repaid in full when you reach the end of your loan term, sell your home, or finish repaying your mortgage, but it can be repaid in part (at least 10% of the market value) or in full at any time.

Can I apply for Help to Build?

You are eligible if you:

· are 18 years of age or over, and have the right to live in the UK

· will live in the newly-built home as your only home

· will be spending less than £600,000 on the cost of the land (if needed) and build

· have a deposit of at least 5%

· secure a self build mortgage from a Help to Build registered lender.

How long with the Help to Build scheme run?

The scheme launched on 27 June 2022, and the government has confirmed that it will run for four years ending in 2026.

How do I apply for Help to Build?

1. Secure a self build mortgage from a registered Help to Build lender

2. Apply for Help to Build through Homes England

If your application is successful, you'll receive an equity loan offer based on the estimated cost of land (if needed) and the build. Then you'll have three years to build your new home.