With high demand for houses but low stock in the market, many people are considering the merits of undertaking a self-build project to secure their dream home. If you have been thinking along these lines – or are a landowner with assets that might be attractive to self-builders – good news could be on the horizon.
To make it easier and more affordable for people to build their own homes, the UK government have introduced a Help to Build scheme through Homes England.
The Secretary of State for Housing, Communities and Local Government, Robert Jenrick, announced the proposal in 2021. He suggested the £150m scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder via mortgages with lower deposits. By lowering the initial deposit required, capital should become free to build the homes individuals want.
The scheme will provide an equity loan on the completed home, similar to the Help to Buy scheme.
Help to Build should also boost local economies by supporting small businesses such as planning agents, architects, builders and mortgage advisers. This is in line with the government’s wider Plan for Jobs scheme and will scale up the number of self and custom build homes created year on year.
How the Help to Build scheme works
There is a lot to understand and consider, but here are 12 of the most important points:
- Applicants will require between 5% and 20% of the property value as a deposit (up to 40% in London)
- The cost of purchasing the land and the anticipated build cost will not be discounted as part of the scheme
- If eligible, applicants can spend up to £600,000, including the cost of land
- The land must be purchased within 3 years of the loan being granted (and lenders will usually require the land purchased to have already received outline planning consent)
- The equity loan is free for the first 5 years, with interest payments starting in year 6. The first interest payment will be 1.75% and this will increase year on year in line with inflation plus a further 2%. Payments are calculated as an annual figure and then divided by 12
- The total repayment is linked to the value of the home, not the original amount borrowed
- If the market value of your home increases or decreases from the estimated land-and-build costs, so will the amount repayable on the equity loan. The repayment is based on the value of the property. Therefore, a percentage of the equity will be payable as part of the loan facility
- You must repay the loan within the term of the mortgage, which will usually be 25 years
- A £1 monthly management fee will be paid for the life of the equity loan
- The application must be approved by a lender registered with Help to Build. Upon completion of the build, the mortgage will automatically switch to a repayment mortgage, which must be in place for the duration of the equity loan
- The mortgage lender will release funds gradually through the build stages until completion
- The equity loan is provided upon completion of the build, where Homes England will pay the mortgage lender the equity loan amount. The applicant will then be required to repay Homes England throughout the remaining term of the mortgage
Requirements of the Help to Build scheme
The scheme requires applicants to meet a set of criteria including:
- Must be 18 years or older
- The house to must be intended to be the applicants only home
- The applicant must secure a self-build mortgage from a lender registered with Help to Build.
Applications can be made for custom builds, self builds or shell builds. With a custom build you would work with a professional homebuilder who organises the project for you. Self build means you would handle every stage of the build including buying the land, building materials and hiring contractors. And a shell build splits responsibility, with a professional taking responsibility for building the structure of your home but you taking responsibility for the internal fit-out.
How you undertake the project may be partly dependent on your individual requirements and circumstances. However, AssetSphere can provide guidance on the options to help you make an informed decision.
Get expert help and advice
Independent, expert financial and mortgage advice can help to make self-building feel far less daunting, and assist with making with the grant application. AssetSphere can provide expert planning advice when looking for a new house-building site and will be happy to provide a free initial consultation to prospective home builders.
Feasibility studies can be undertaken to determine the likelihood of gaining planning consent, providing a greater degree of confidence on the journey towards a new home. We also work with a range of professionals such as architects, ecologists, heritage consultants and highway consultantans who can provide additional advice and insight.
Current owners of land or property may also benefit from the scheme due to the anticipated uplift in the number of people seeking to to build their dream home. We can provide advice on existing land and other assets, and seek outline planning consent which could then be sold on to prospective self-builders.