Help to Build
The government’s Help to Build Equity Loan Scheme is now live. The new scheme makes it easier for your clients in England to obtain a mortgage for a self or custom build home with just a 5% deposit.*
With Help to Build, your client only needs a 5% deposit.*
The government has launched its much anticipated Help to Build Equity Loan Scheme to make it easier for more people in England to build or commission their own homes.
The government aims to build 300,000 homes annually by the mid 2020s. It wants to diversify the housing market by providing new options to customers including self and custom build.
If your clients are eligible for the scheme, they will only require a 5% deposit* to obtain a mortgage. The government will top up their deposit with a loan of 20%, and the other 75% of the build cost will be funded through a self build mortgage.
As the leading experts in this field, we are here to guide you so you can help your clients through the Help to Build application process, and provide best advice.
*T&Cs apply. Please note the scheme does not include funding for professional fees, such as the costs for architecture, planning or engineering. These will need to be paid for separately.
What is the aim of the scheme?
The government aims to build 300,000 homes annually by the mid 2020s. It wants to diversify the housing market by providing new options to customers. The Help to Build Equity Loan Scheme is designed to make undertaking a self or custom build project in England more attainable for greater numbers of people in England with just a 5% deposit* required.
*T&Cs apply. Please note funding for professional fees, such as the costs for architecture, planning or engineering are not included in the scheme – these have to be funded separately.
Who is the scheme for?
The scheme is open to all customers who meet the eligibility criteria and who want to build or commission their own home in England.
What are the eligibility criteria?
To qualify for the Help to Build Equity Loan Scheme, your clients must meet the following criteria:
- Aged 18 or over
- Right to live in England
- Must not own any other residential property, including buy to lets, in the UK or elsewhere in the world. This applies to anyone else living
- Will occupy the property as their only or main residence, immediately following the completion of the build
- Satisfies Homes England’s anti-money laundering requirements
- Must pass the sustainability requirements set by Homes England
- Able secure a self build mortgage with a registered lender
- Must engage a conveyancer as soon as their application is approved through to drawdown of the equity loan
How does the scheme work?
With self and custom build, the typical deposit required is 20% – 25%. With the Help to Build Equity Loan Scheme, your clients only need to contribute 5% with the government topping up the other 20% in the form of an equity loan. The remaining 75% will take the form of a
The equity loan is paid to the lender by the government on completion of the build.
The maximum loan amount available under the scheme is £600K, though with maximum limits of £200K for the land and £400K for the build costs.
The minimum customer contribution is 5% of the property’s initial land and
The maximum Homes England contribution will be:
- Outside London area – 20% of the initial land and build costs capped at £120K
- London area – 40% of the initial land and build costs capped at £240K
The maximum term to drawdown for Help to Build equity loan approval is 36 months.
No interest is payable on the equity loan for the first five years.
*T&Cs apply. Funding for professional fees, such as the costs for architecture, planning or engineering are not included in the scheme – these have to be funded separately.
How is the equity loan paid and repaid?
The government equity loan is paid to the lender on completion of the property to pay off part of the mortgage. The self build mortgage must switch to a repayment mortgage.
Borrowers do not pay any interest on the equity loan for the first 5 years.
From year 6, interest will be charged at a fixed rate of 1.75% per annum. From year 7 onwards, interest will be the previous year’s interest increasing by 2% plus CPI.
A management fee of £1 per month is payable for the whole term of the equity loan by direct debit.
Is the scheme only open to first-time buyers?
No – the scheme is open to anyone who meets the eligibility criteria.
When will the scheme expire?
The scheme will run for a period of four years from December 2021. The last permissible timing for draw down will be 2028.
What is meant by a self or custom build home?
Self and custom build is defined under the Self Build and Custom Homebuilding Act 2015.
- Building or completion must be undertaken by individuals, an association of individuals or persons working with or for individuals or associations of individuals, of houses to be occupied as homes by those individuals.
- It does not include the building of a house wholly or mainly to plans or specifications decided or offered by that person.
What types of property are eligible?
- The property must be a new build property. Newly constructed and completed dwellings, including flats created by utilising the airspace above an existing property (provided it has its own address), converted commercial premises and any conversions, which have not been used as residential dwellings, immediately before conversion are eligible; houses split into flats are not included in the definition.
- Any property (a house or building), which has been previously occupied, either by an owner-occupier, licensee or a tenant, which is to be demolished in full, in order to build a new self and custom build property, may be eligible for approval.
- Shell properties, designed to allow customisation of internal walls, completion of second fix and final fit out are permissable
- Leasehold houses are not eligible for the scheme, except in the exceptional circumstances permitted under the Help to Buy scheme. For leasehold flats, ground rent must not exceed a peppercorn per annum.
- Self build warranties are required and need to be in place before completion.
BuildLoan will guide you through the application process. We can check your client is eligible for the scheme and help you to secure a mortgage for them. Get in touch with our Broker Support Team for more information.
For the first time, Help to Build creates a level playing field for self build, custom build and new build. Help to Build allows young people and those with smaller budgets to access to self build mortgages with as little as a 5% deposit.