Help to Build

Building your own home is becoming easier and more affordable. Have you ever dreamed about building your own house but never thought you would be able to afford it? Then there’s some good news. The government has launched a new Help to Build: Equity loan aimed at making it easier and more affordable for self-builders to build. Here's everything you need to know.

Paula Higgins CEO & Founder

The government’s Help to Build scheme aims to make self and custom home building a realistic option to get onto the property ladder through lower deposit mortgages.

Launched on 27 June 2022, you can now apply to create your own home for up to £600,000 with a 5% deposit and get an interest-free (for 5 years) government Help to Build loan.

The loan scheme operates in a similar way to the Help to Buy scheme. And you will be eligible whether you are building a commissioned, made to order home or a new design from scratch.

There are huge benefits to building your own home. For example, if you opt for a made to order home, you can customise your new home based on existing designs. This means the space can be designed for your needs.

This scheme will make building the home you want more achievable for many people. Not just those who have owned or built a home before. The Government says the scheme could deliver 30-40,000 new homes a year.

How does the Help to Build scheme work?

The Help to Build Equity loan is an equity loan that is designed to help cover the upfront costs of buying land and building the home.

The equity loan amount can be between 5% to 20% (up to 40% in London) of the total estimated costs. You can spend up to £600k on your new home. This must include the cost of the land, if you don’t already own it, and no more than £400k in construction costs to build it. If the build exceeds the cap, you can inject more of your own cash.

You can apply to the scheme now.

How to apply to Help to Build

Once you have your 5% deposit together, the other 95% mortgage needs to come via a Help to Build Mortgage, which can only be provided by lenders approved by the government agency, Homes England, which runs the scheme.

And options are limited. New products have been created by BuildLoan in partnership with Darlington Building Society. There are two products in Darlington’s Help to Build mortgage range, both three-year discounted rates at either 5.39% or 5.99%.

Once you have a mortgage offer, you apply for Help to Build through Homes England. If your application is successful, you’ll receive an equity loan offer. The amount will be based on the cost to buy the plot (if needed) and build the home.

During the construction stage, your lender will release funds at various stages as agreed.

When your home is completed, Homes England will pay the equity loan to the registered lender. You will then owe the government the 15% equity loan. This loan will be interest-free for the first 5 years.

Your self-build mortgage will automatically switch to a repayment mortgage.

The Help to Build scheme will be open for 4 years. Once you accept the equity loan offer from Homes England, you’ll have 3 years to buy the land and build your home.

Who can apply for Help to Build?

You can apply for Help to Build if you intend to live in the newly-built home as your only home and you have managed to secure a self build mortgage from a lender registered with Help to Build. When you apply for the equity loan, Homes England will carry out checks to make sure you can afford the equity loan payments.  You also need to be over 18 years old and have the right to live in the UK.

You’ll need a deposit of at least 5%.

How will it compare to Help to Buy?

It is similar to the Help to Buy Equity Loan scheme, as the government will lend you up to 20% of the cost of your new build home (40% in London). This is called the equity loan. You’ll need at least a 5% deposit and the remaining amount of up to 75% will come from a specialist mortgage product.

However, the Help to Buy Equity Loan Scheme isn’t suitable for self-builders. This is because it needs the equity loan to be paid on legal completion to the developer. This wouldn’t be suitable for custom and self-build as they’d normally need multiple payments to different parties.

While the details of Help to Build are yet to be fully revealed, the government has developed the scheme with Homes England in consultation with the National Custom and Self Build Association (NaCSBA). It looks like Help to Build will be a similar process to the Help to Buy equity loan. Self-builders would secure a self-build mortgage with a 5% deposit, with the mortgage lender providing 95% of funding for the project, guaranteed by the government in case you default. And when the build is completed, the government would provide 20% of the cost of the build to the lender. This would reduce the outstanding mortgage value to 75%. And you would have a 15% equity loan from the government.

What else is stopping people building their own homes? 

As well as access to finance, the government has highlighted two other main barriers preventing more people from building their own homes. These are access to land; there aren’t enough serviced plots – plots with planning, utilities and access – suitable for self and custom build available. The other factor is the expertise and knowledge gap; the availability of consultancy expertise is limited and the wider knowledge base of self and custom build is low.

How are these issues being tackled?

The self and custom build action plan published by the government details how these problems are being addressed. These include plans to increase the amount of plots available on brownfield land. As part of last year’s Spending Review, the government announced extra funding for local authorities to release their surplus brownfield land through the Brownfield Release Fund. This will allocate up to £25 million to local authorities to enable them to bring forward serviced plots for self and custom build on public sector land.

And in terms of bridging the knowledge gap, the National Custom and Self Build Association’s Right to Build Task Force was established to help local authorities, community groups and other organisations help deliver self and custom build housing projects across the UK. It provides expertise and support to local authorities on the implementation of the Right to Build and how to secure self and custom build delivery.

‘An interesting scheme – but let’s see the details’

HomeOwners Alliance Chief Executive Paula Higgins says, ‘We welcome the Help to Build scheme; many people may feel building their own home is out of their reach and this could make it a reality.  The added bonus is that we will reduce our reliance on the big developers to build the homes we need.

‘We’re keen to see the details of how this will work and encourage government to tackle the other obstacles from building their own home – the difficulty in finding suitable land and the lack of confidence and expertise in undertaking such projects.’

What do you think?

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