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Government has opened the much anticipated Help to Build equity loan scheme, with applications accepted from 27 June. Initially announced in March 2021, the Help to Build equity loan scheme will help more people with smaller deposits access an owner commissioned home.

The scheme will make a big difference to many, as most custom and self build homes were unable to access Help to Buy, and this scheme will help redress the balance. Based on proposals from NaCSBA, the Help to Build will enable many more people to build the homes that they want to live in, bring choice and diversity to the market.

Help to Build – how it works

The £150 million of initial funding will offer people an equity loan of between 5% to 20% (up to 40% in London) of the total estimated cost. But to qualify you need to meet set criteria, set out in the prospectus.

To qualify you can spend no more than £600,000 on your new home, including the cost of the land, unless you already own it. In this case you can spend no more than £400,000 on the build.

To apply you need to:

  1. Have a deposit of at least 5%
  2. Secure a self build mortgage, from a lender registered for Help to Build, or through a broker.
  3. Apply for Help to Build through Homes England

Full details are available in the Help to Build Prospectus

Successful applicants will receive an equity loan offer based on the estimated cost to buy a plot and the build costs. Once your home is complete, Homes England pays the equity loan to the registered lender.

Remember, this is not a discount scheme – the costs are the same as if you were funding the build yourself, and the loan attracts interest. For the first five years no interest is charged, and is only applied from year six onwards, and the total amount you pay is related to the value of your home at the time of the loan being settled, as opposed to how much you borrowed at the start.

Plus, once offered, you have a three year period to find land and complete your home.

While you’re building you’ll be on a self build mortgage, which typically pays out money at different build phases, and on completion you will transfer to a regular repayment mortgage. It is at this point that the equity loan element is paid to the lender by the government.

Find out more about Finance and Fees

“Help to Build is important because it opens up custom and self-build as an option to those with smaller budgets and in particular smaller savings. Access to finance is just part of the answer. The key constraint is access to land with permission to build. This challenge is being addressed in part through the Right to Build legislation, which requires local authorities to ensure enough plots are permissioned to match the demand on the registers that they operate.

“However, some local authorities have been too slow to respond to the legislation, and it is important that they do more, not least to respond to the increased demand following the launch of this scheme. This is why the government’s response to the Bacon Review, also published today, and the ongoing funding to the Right to Build Task force are important pieces in a wider plan,” says Andrew Baddeley-Chappell, NaCSBA CEO.

Karen Curtin, managing director at Graven Hill, the UK’s largest custom and self build development, welcomed the Help to Build scheme, saying it was long overdue. 

“The Help to Build scheme is a dream come true for many would-be self-builders, and we’re in full support of the initiative. With applications now open, the UK is finally moving in the right direction as we continue to revolutionise the housing market. Gone are the days of self and custom building being for the few – we are thrilled to see it become an option for the many,” she said.

How could it work?

During the build
You borrow from your mortgage lender:

Deposit: £20k (5%)
Self build mortgage: £380k (95%)
Total amount: £400k

Once completed
Once your home is ready and (should you still want the equity loan) government pays it to your lender to reduce the amount you need to borrow on your repayment mortgage. The example below shows a loan outside London (based on 20% – within London government will lend up to 40%)

Equity loan: £80k (20%)
Deposit: £20k (5%)
Equity loan: £80k (20%)
Repayment mortgage: £300k (75%)
Total amount: £400k

Andrew Craddock, Darlington Building Society Chief Executive said: “Extending into Help to Build was a logical step as the Society has been at the forefront of self-build lending for over a decade, in partnership with BuildLoan.

“Self-build isn’t the preserve of the wealthy, and Help to Build makes it more practical and accessible than ever before for people to build their dream home. This scheme also opens up the opportunities to first-time buyers. It is a fantastic example of the market moving with the times, and people’s changing wants and needs.

“With 40% of UK emissions coming from homes in the UK, self-build projects can also offer a greener alternative, as people can opt to add more environmentally conscious measures – both during the build stage and to last throughout the lifespan of the finished property.

“Help to Build also helps to diversify the UK’s housing stock and alleviate the shortfall in available homes, and I for one am looking forward to seeing the new homes it creates.”

Next steps for growth

Help to Build represents an opportunity for sector growth, and NaCSBA is encouraging the sector to ensure that the fullest possible ranges of options to custom and self-build exists. This includes, for example, the building of custom and self build flats and apartments, and the conversion and renovation of existing properties.

The challenge now is to secure enough smaller and more affordable plots and options to enable people to take advantage of Help to Build, and democratise self build. This will help address the “Missing Market” identified by Richard Bacon MP in his Review of Custom and Self Build.

“When we have fully opened up the housing market and the planning process to the power of consumer choice, we will see more great places being developed which are warmly welcomed by their communities, with beautiful and more spacious houses, at keener prices – and that are better designed, better built, greener and which cost less to run, which enrich the lives of the people who live there – while driving innovation and inward investment. And when afterwards we have done this, we will look back and wonder why it took us so long,” Richard Bacon, Review of Custom and Self Build.

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