We are all familiar with Help to Buy – a government-backed scheme which helps first time buyers purchase a new-build home with just a 5% deposit. However, it is now time to become familiar with Help to Build.
Unlike Help to Buy, Help to Build aims to help those seeking to commission or build their own home and helps builders with cash flow during the build. More and more individuals have ambitions to build their own home, as they have the freedom to decide on the design, internal layout and location. The main barrier to doing so however, being finding the money to fund the project. Help to Build aims to eradicate this barrier so that these ambitions are achievable and self-build homes are more accessible and affordable.
What is Help to Build?
Help to Build is a new government equity loan, announced back in April 2021, that will be available to people in England who want to custom build or self-build their own home.
An equity loan is offered, between 5% and 20% (up to 40% in London), based on the total estimated costs to buy a plot of land and build the home. If eligible, up to £600,000 can be spent on the new home, which must include the cost of the land if not already owned and no more than £400,000 on the cost to build. The loan is interest free for five years.
A minimum of a 5% deposit will be needed and a self-build mortgage, which must be provided by a lender registered with Help to Build. Funds will be released at various stages of the build until the build is complete, at which point the mortgage will automatically switch to a repayment mortgage which must be in place for the duration of the equity loan, normally 25 years.
The redemption amount is based on the value of the home at the time chosen to repay and is not linked to the amount initially borrowed. Therefore, if the market value of the home increases above the estimated land and build costs, the amount owed on the loan will increase and vice versa if the market value decreases.
If the equity loan is offered, the purchase of the land (if needed) and the build of the home must complete within a span of 3 years.
Who is eligible?
Anyone who is 18 years of age or over and has a right to live in England, the newly built home will be their only home and they have secured a self-build mortgage from a lender registered with Help to Build.
Application Process
The scheme is still in the initial stages and relatively new. Whilst it was previously believed that applications will open for Help to Build last year during winter, it does not appear this was the case. However, while the exact date has not yet been announced, it is only a matter of time before the scheme is up and running. To be first in line for more information, register your interest in Help to Build here.
For further information on the Help to Build: Equity Loan scheme, please click here to be redirected to the Gov.uk page.