Help to Build

The Help to Build equity loan scheme launched in June 2022, to help people in England finance custom or self builds. The scheme was created to make building your dream home more accessible to everyone. So, if designing your own home is something you’ve always aspired to, or you’re fed up of looking at houses which don't tick all your boxes, read on to find out more.

In this article:

What is the Help to Build scheme

The Help to Build equity loan is a new, government funded scheme, that launched in June 2022. It provides people with the opportunity to design and build their own home, with a minimum deposit of just 5%.

Who is eligible for the Help to Build scheme

How does the Help to Build equity loan scheme work?

There are 2 key take-aways you need to know about how this scheme works

1. Self build Mortgages

In order to secure your equity loan, you must first arrange a self build mortgage from a broker, or provider, that is registered with Help to Build. These mortgages can have a Loan to Value (LTV) of 95%, meaning you need a deposit of just 5%.

2. Apply for your Help to Build equity loan

Once you have a mortgage in place to finance your build, next up is applying for your equity loan. If successful, you’ll receive a loan offer based on the estimated cost to buy the plot of land and build your home. The offer value will be between 5% – 20% (up to 40% if building in London) of these total estimated costs.

What is the cost for self builds

Without a Help to Build equity loan, the cost to build your own house can vary. With a Help to Buy equity loan, the maximum amount you can spend on your self-build is £600,000 which includes a maximum of £400,000 for the build itself.

Using your equity loan to help with repayments

Once your home is built, the government funded scheme (Homes England) will pay the amount secured via the Help to Build equity loan straight to your self build mortgage provider. Then the equity loan value will be deducted from the amount originally agreed and you will be moved onto a repayment mortgage.

When do you pay back the Help to Build equity loan

During the term of your equity loan, your monthly repayments only contribute towards interest. You cannot contribute monthly towards the loan itself, you can either pay off in full or make part payments during the loan’s term (following specified scheme conditions). If you sell your house before the end of the term, you will also need to pay back the equity loan in full.

With the Help to Build equity loan you have five years where no interest is added, and therefore no payments are required, other than a monthly management fee of £1 – which you begin paying when your equity loan starts. Interest is charged on your loan and repayments start from year six.

The interest you pay back is worked out by applying a percentage to the value of your loan and split into 12 equal monthly repayments. Each year, the interest rate will increase. This increase depends on the CPI (consumer price index), so it’s important to ensure you can maintain these payments. This will also be factored in when you apply for Help to Build.

When making either a full or part payment towards the equity loan, the percentage you pay back is worked out from the market value of your house at the time of payment. For example, if you had a self build mortgage of £400,000 and an equity loan offer of 20%, the original value of your loan would be £80,000. If your house is valued at £500,000 when you choose to pay back the loan, the value to pay back is 20% of that market value, equalling £100,000.

There are different types of builds you can use this equity loan for:

Custom builds

With a custom build, you work alongside a developer to design your house. These types of builds are often available in housing developments made specifically for custom builds.

Self build

This type of build is the most bespoke. Every element of the build and design is ultimately down to you. Normally with these builds that you will hire an architect or a project manager, as they are created entirely from scratch.

Shell home

Exactly as it sounds, this method allows you to purchase the bear minimum brick and mortar that constitutes a house. Everything inside the four walls and roof is down to you to plan and build, including electricity, rooms and flooring.

Before you can apply for an equity loan (and in many cases your self build mortgage) you must have outline planning permission for the land you want to build on.

Already own your plot of land?

If you already own your plot of land, the mortgage will not include this cost.  However, if you use an equity loan to help with the repayments, the plot of land will be included in the percentage share you repay. This is because the Help to Build equity loan takes into account the overall market value of the property at the time of payment.

Right to Build Register

If you don’t already own the plot of land, you can raise your interest through the Right to Build Register, an online platform connecting local planning authorities with individuals who are interested in building their own homes.

Other help to buy schemes available

If you’re looking to get onto the property ladder but a Help to Build isn’t right for you, there are other schemes available. Find out more about the various schemes by clicking the links below: