Self builders in Scotland need to be quick if they’re hoping to apply for the Self Build Loan Fund, which closes on the 31 August 2022.
Administered by the Communities Housing Trust (CHT) on behalf of the Scottish Government, the fund is designed to support self or custom builders, allowing them to finance the construction of their new home up to a maximum of £175,000.
In March 2021, Scottish government extended the Fund for another year to allow for the inevitable delays brought on by the pandemic and its impacts on labour and materials. At the same time it boosted the fund by £2 million.
The fund was launched on 1 September 2018 and is open to applications from individuals who have been unable to secure self-build mortgage finance from the mainstream market for their project, but are in the position that they can repay the loan by 31 August 2023.
To date, the fund has financed the projects of 40 families and individuals in 13 local authority areas: Aberdeenshire, Argyll & Bute, East Ayrshire, North Ayrshire, Falkirk, Highland, South Lanarkshire, Orkney, Perth & Kinross, Scottish Borders, Shetland, Stirling and the Western Isles, with more to come.
In February 2021 the CHT created a short briefing paper about the impact of the fund, which you can see here and captured in the infograhpic below.
This reflected growing demand for the Self-Build Loan Fund, with increasing interest over 2020, rising by 153%.
Ethical lender Ecology Building Society is incentivising sustainable building with a new range of discounts for the most energy efficient homes on its C-Change mortgages for custom and self build homes.
The new discounts have a maximum discount of 1.5% off the rate for homes that reach Passsivhaus standards, with a sliding scale of discounts available for other highly energy efficient standards. The enhanced range builds on the building society’s record for supporting sustainable and energy efficient projects.
Not only do the new discounts help meet the UK’s net-zero ambitions, but they are a welcome incentive at a time of increasing mortgage rates and the wider cost of living crisis.
Ecology’s self-build mortgages start with an initial rate of 4.99% during the construction phase of your project (from 1 August). Once completed, borrowers who have achieved the right standard are eligible for a C-Change discount of up to 1.5% based on the SAP rating in the EPC (Energy Performance Certificate) or if the property is accredited to the AECB Building Standard or Passivhaus standard.
The changes also include the addition of dedicated discounts for homes built to a SAP rating from 100 to 109 and SAP ratings of more than 110, of 1% and 1.25% respectively. This is a first, which Ecology is referring to as A+ and A++, that reflects the environmental performance of homes built to a standard that generates more energy than they consume.
Building Regulations require that a SAP calculation and a predicted ‘On construction’ Energy Performance Certificate (EPC) is submitted for new dwellings prior to building work commencing.
For example, if the finished build is accredited to the Passivhaus standard a discount of 1.5% applies giving a variable rate of 3.49% for the remaining term of the mortgage (from 1 August). An application fee of £799 is payable and applicants can borrow up to 80% of the property’s value in stages to support the progress of the build.
The decision to enhance the discounts comes at a time when the government is recognising the urgent need to reduce the carbon impact of house building and has stated that new homes much reduce carbon emissions by 75% by 2025.
The Society also offers a Renovation Mortgage where a property is being purchased for renovation or retrofit. They will consider lending on homes in any condition, as long as the works required improve the energy efficiency of the property. On completion of the renovation the Society’s retrofit discounts apply.
Daniel Capstick, Ecology’s Mortgage manager explains, “Now more than ever it’s important that lenders play an active role in incentivising green building and helping to reduce energy bills. We’ve been leading the way on sustainable mortgages for over 40 years, and we hope that the updates to the C-Change discounts will encourage our borrowers to build even more energy efficient homes, which is critical in the fight against climate change.”
Mark Stevenson, Chair of the National Custom and Self Build Association said: “NaCSBA knows that custom and self-builders lead the way in innovation and sustainability, as individuals invest more in a home that they have designed to suit their needs than a speculative builder would.
“This was evidenced in our 2022 Custom and Self Build Market Report, where over half of all self-builders said they had used a sustainable heat source in their project. Ecology’s new discounts are a welcome incentive in the market, rewarding those who want to build a more sustainable future for themselves and their communities, and which set a challenge for the wider industry to raise its game and promote more sustainable construction practices.”
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.
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:
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.
“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.
During the build
You borrow from your mortgage lender:
Deposit: £20k (5%)
Self build mortgage: £380k (95%)
Total amount: £400k
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.”
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.
The National Custom and Self Build Association (NaCSBA) has welcomed the publication of the Help to Build prospectus, and calls for members of the public to register to be among the first to take advantage of this pivotal scheme on opening for applications.
The link for registering is at the end of the prospectus, as it is important that people understand how the scheme works before registering to find out more information. Registering will ensure you are notified for when the scheme formally opens, and you can find out more on the government’s Own Your Own Home website.
Help to Build is the government’s new finance programme – an equity loan scheme designed to open up the custom and self build market to people with smaller deposits.
The potential of the scheme is significant, making an owner-commissioned property a more affordable route to home ownership, for more people. This in turn will lead to more homes being built, contributing to government’s ambition to delivery 300,000 homes annually. The loan doesn’t just have to be for a self build, as other options, such as barn conversions, are covered.
The loan is a first for anyone wanting to custom or self build, as the Help to Buy scheme, which this scheme is loosely based on, was not available on owner-commissioned homes.
Where Help to Buy transferred the funds to the developer, Help to Build is focussed on the mortgage lender. This is because the self-builder is likely to engage with multiple parties – to buy the land, build the house and fit out the interior. The new scheme is expected to open up the market to more people wanting to build, especially those with smaller deposits.
The prospectus sets out what would-be self and custom builders can expect from the scheme, such as the fact that lending is only through registered stakeholders, and the self build mortgage used to build the house will convert to a non-custom or self-build mortgage on completion of the build.
It also sets out the eligibility criteria for applying, for example:
NaCSBA hopes that the success of the scheme will help drive a step change in the sector encouraging more permissioned land to come forward and more businesses delivering the sites and homes that customers desire. In doing so it hopes it will create a virtuous cycle of activity as the sector works towards creating the 30,000 to 40,000 homes a year that the government would like to see the it provide.
Help to Build could support this vision by helping several thousand people along the road to home ownership.
Housing Minister Christopher Pincher MP said: “People across the country dream of building their own home and through our ground-breaking Help to Build scheme we are making it a realistic and affordable option.
“Help to Build will put them in charge of the house-building process and make sure they get the home they truly want.
“This scheme will also support small housebuilders and create thousands of local jobs – providing a huge boost the self and custom build sector and delivering much-needed new homes.”
Andrew Baddeley-Chappell, NaCSBA CEO said: “Help to Build will mean that more people can have the new home they actually want including those with smaller deposits, sound plans and big hopes. The greater choice enabled by this scheme will lead to more affordable and better homes that are more wanted and more sustainable.
“Contrary to common perception, in most cases custom and self build is not about people undertaking the build themselves. Rather, it is about the homeowner having control over the design and specification of their project – enabling them to create the home they want, rather than the one someone else believes they would like. It means that new homes will now be part of the solution for the large numbers of people whose cultural, ecological, physical or emotional needs are not currently met by the new-build market.”
Karen Curtin, managing director at Graven Hill, the UK’s largest custom and self build development, said: “With self-building becoming more affordable, we hope that more people will feel able to purchase their own self-build plot. We’ve found them to be hugely popular, so it’s clear that there is a desire to self-build among the general population. People have simply not been given as much support as needed to explore this route until now.
“Accessibility has always been at the heart of Graven Hill, with purchasers benefitting from financial support such as Plot Passports, fast track planning, Golden Brick packages and custom home options, we aim to make the self-building process as simple as possible for homeowners. Now, there is even more opportunity for all homeowners to create a home that meets their requirements and lifestyle.
“We will be releasing a number of new plots that will be eligible for this government funding in the near future. By taking a more innovative approach to house buying, we can make ‘settling’ a thing of the past.”
Scotland-based Allan Corfield Architects is expanding its national coverage with a permanent presence at the National Self Build and Renovation Centre (NSBRC) in Swindon, and the launch of its first seminar for self builders wanting to develop their skills.
Architect Jenny Chandela has joined ACA, working out of its brand new NSBRC stand three days a week, and is able to answer questions or chat to you about your project. Alternatively, if you cannot get to Swindon ACA also offers a free initial online consultation.
In line with ACA’s ethos of supporting self builders, as seen in its online Learning Centre, it has launched its first self build seminar at the NSBRC, How to Self-build Successfully*.
The one day event runs from 8:30 – 4:30, and is repeated on the Wednesday 27 and Thursday 28 October, and costs £80 per person, and is designed to educate novice builders all the key elements of the self build journey.
Topics covered include:
Speakers at the event:
Allan Corfield, AC Architects, Self Build and Low Energy Expert
Tom McSherry, BuildStore, Finance Expert
Brian Singleton, ADM Systems, MVHR Expert
David Gallagher, AC Structures, Structural Engineer
James Bryden, CLPM, Project Management and QS
David Hilton, Heat & Energy, Renewable Heating Expert
* The How to Self-build Successfully seminar is not suitable if you are already working with an architect.
Community groups working to build their own homes will welcome the news that government has launched a £4million Community Housing Fund grant programme.
Housing Minister Christopher Pincher launched the fund recently, which is an extension to the Community Housing Fund, and is targeted at groups who are already organised and can prove their deliverability and are at the later stages of the pre-development phases.
The fund is administered by the Community Led Homes Partnership an umbrella organisation made up of the Confederation of Co-operative Housing, Locality, National Community Land Trust Network and UK Cohousing Network.
Community housing bodies, as well as NaCSBA, continue to lobby government to renew the wider Community Housing Fund, with news expected in the Comprehensive Spending Review in Autumn. Continuing the fund was one of the recommendations set out in the recently published Bacon Review, so the news of this interim fund is a welcome example of government’s willingness to support the sector.
Tom Chance, Community Land Trust Network Chief Executive said: “Community led housing groups are rooted in their communities and truly understand local housing needs. There are so many fantastic projects planned across the country. This programme will help many of these projects come to fruition.
“This extension is very welcome news. But we know there are potentially 23,000 homes in the pipeline and without further Community Housing Fund most will not happen. So our campaign calling for the fund to be renewed for a further 4 years continues.”
The fund is already open to applications until 31 December 2021 (or the money is allocated), and the works funded by the grant must be completed by the close date of March 2022.
To apply complete an eligibility checker on the Community Led Homes website. Eligible groups will then be emailed an online grant application form.
Anyone considering a self-build scheme as part of a group may want to consider cohousing, and, if so, a new practical guide from UK Cohousing Network offers practical insight to help you achieve your goal. Cohousing is a model in which you have your own private home while sharing common facilities as an intentional community of likeminded individuals.
Cohousing is a distinct approach to designing healthy neighbourhoods, which was developed in Denmark in the 1960s. Following steady growth in the UK over the past 14 years, UK Cohousing Network has responded to demand by publishing the country’s first ever comprehensive ‘how-to’ guide.
Based upon first-hand experience of existing schemes, the guide is essential reading for both housing/planning professionals and community groups, and takes the reader through all the stages of development from conception to living together.
Cohousing communities are usually between 20-40 private dwellings with a common house, shared garden and other facilities. Residents in cohousing schemes share a common vision, and are closely involved in the design, development and long-term management/stewardship of their neighbourhoods. As such, community is at the heart of every project.
Shared spaces vary, and can include a hub for meetings and get-togethers, a shared kitchen (in addition to individual homes’ kitchens) for optional communal meals, shared gardens, laundries or even guest suites for smaller units, to remove the need for redundant bedrooms.
With over 170 pages, the guide takes groups through the entire project pipeline, drawing on experience from cohousing groups and experienced advisors. The guide explains the process of creating a group – including setting a vision, finding a site, planning, building and living in the finished project. It also explains design elements and issues around finance.
Cohousing has well-recognised benefits, and a major element in that it combats isolation and loneliness, making it a popular choice for older people, as well as a route for families and younger people. This also makes it a popular route for groups of people with shared value sets or experiences, such as the LGBTQ community.
The guide is part of the membership package for UK Cohousing Network and is available to the Community Led Homes hub network. The UK Cohousing Network’s website has lots of free information about the route, and the network is part of the Community Led Homes website, which explains the full range of approaches to community led housing, and the differences.
But groups seriously embarking on a cohousing project will find the guide, and the membership that supports it, a valuable resource.
Membership of the UK Cohousing Network costs between £60 annually for individuals looking for groups, £90 a year for established groups, with prices for NGOs and commercial memberships set at £200/£300 per year.
The Government has launched its First Homes scheme with the initial properties in the scheme going on the market in the Bolsover district, East Midlands.
The scheme is designed to help young people and key workers onto the housing ladder, and is the flagship model in the ‘Own Your Home’ website. The new site illustrates the range of support available to help people access a home of their own, and includes the Help to Build scheme – yet to open for bids – and NaCSBA’s Self Build Portal.
As the showpiece of the campaign, the First Homes scheme has been designed for local first-time buyers, enabling them to purchase a property with a discount of at least 30% compared to the market price.
The discount is maintained in perpetuity for first-time buyers, meaning that when the home is sold the discount is able to be passed on to the new purchaser, as long as they fit the criteria. This ensures that the homes will always be sold below market, as long as it is first time buyers that buy it.
The scheme has been designed to specifically support key workers, such as NHS staff and veterans, and in turn offering wider benefits to local communities and enable them to stay in the communities where they live and work.
The initial First Homes properties went on the market in the Bolsover district, East Midlands, with a further 1,500 being market over the coming year. Government expects this to deliver 10,000 homes a year, which could be increase if there is demand.
The Halifax, Nationwide Building Society and a range of local building societies and community lenders have committed to providing high loan-to-value mortgages for First Homes to support the scheme.
Delivery of the scheme is part of the government’s wider pledge to build one million new affordable homes in this Parliament and help put home ownership within reach for people across the country. Help to Build is part of this commitment, which is also expected to boost housing delivery by enabling more people to custom and self build.
The Help to Build Scheme is designed to support self and custom home building, allowing it to become a realistic option for more people wishing to get on to the housing ladder through lower deposit mortgages.
Lowering the required deposit will free up capital, so people can build the home that they want and need – whether it’s a made to order home on a multi-plot site or a stand alone self build. The scheme will provide an equity loan on the completed home, similar to the Help to Buy: Equity Loan scheme.
The government’s ‘Own Your Home’ campaign showcases the full range of home ownership options supported by government, such as the the 95% mortgage guarantee scheme which helps first-time buyers secure a mortgage with just a 5% deposit.
Housing Secretary Rt Hon Robert Jenrick MP said: “Enabling more people to buy their own homes is at the heart of the mission of this government, and First Homes will offer a realistic and affordable route into home ownership.
“Thanks to First Homes, we will offer more homes to local people and families, providing a route for first-time buyers to stay in their local areas rather than being forced out due to rising prices.
“First Homes will also support our fantastic key workers who are looking to get their first foot on the housing ladder – from front-line doctors and nurses to delivery drivers and supermarket staff – by giving many of them the chance to buy a home at a 30% discount.”
Specialist self and custom build mortgage broker Buildstore Mortgage Services has shared with the Self Build Portal the fact that lending for the sector is in great shape currently, with a wide selection of products available.
For anyone looking to build their own home, the first thing people want to find out is how much they can realistically borrow. According to Buildstore Mortgage Services, the average value of a completed self build property it arranged finance for last year was just over £600,000, with the typical client borrowing around half of the final value of the home.
For those whose aspirations are a little higher, BuildStore confirms that interest at the higher end of the self build market is continuing to grow and mortgage lenders are keen to tap into this demand.
Chris Martin, Head of Product Development and Underwriting at BuildStore, commented: “We are seeing more potential self builders looking for mortgages over £1 million to help them build their exciting forever home. We work very closely with lenders to develop products that reflect changing market needs and we have a number of mortgage deals available for larger loans.
At NaCSBA we know that building your own home has many benefits – with self builders securing a home where they want to live, in a property designed by them to meet their own specific needs and circumstances. But BuildStore confirms that self builders are also likely to build their new home significantly cheaper than buying a comparable home from a developer.
It also knows that financing a home to build to an individual specification is different to buying an established or new-build property, but there is plenty of help and guidance out there if you know where to look.
“Every self-build client and project is different and lenders are also becoming more flexible with who they will lend to – including how they look at the self-employed and contractors and how they view different construction types,” says Martin.
“Many self builders want to benefit from the shorter build times and better environmental credentials of modern methods of construction and there are many mortgage products available for this type of project.
“Self build is a growing area of the housing market and as it scales up we expect more lenders to enter the market and more options to open up for aspiring home builders – whether they want to borrow £300,000 or £1 million or more.”
According to specialist lender Together, a third of Brits would sacrifice part of their garden if it meant they could self build on the land. Based on a new survey, the data indicates that over 34% would take on a major self-build, with a mix of motivations. Of those surveyed, 14% said this would create a home for a family member, 10% would build a house they would sell and 8% would move in themselves.
According to the survey, 26% of respondees were interested in creating a standalone ‘granny annexe’ for visiting friends or family, if they had the space. Many attributed this desire due to the way in which the pandemic forced us to reconsider how we interact with our extended families.
One in ten also said that the boom in popularity for staycations offered an opportunity to rent such a garden build out as a short-term holiday let, while 8% said they were interested in long-term lets.
But it’s not just big builds that people wanted in their garden, with a fifth (20%) of respondents saying they’d be keen to build a summerhouse or workshop to create their perfect space.
Scott Clay, distribution development manager at Together, said: “Our survey highlights homeowners’ ambitions as we begin to return to a different kind of normality.
“People are thinking more creatively about how they could use their outside space, whether that is providing a standalone home office, a home for themselves to live or sell, or a specially-designed home for elderly or disabled relatives.
“It’s important that homeowners have enough space and get any required building consent, including planning permission, before they take on a self-build. They will also need a lot of planning, determination, and the right finance in place before they start their project.
“However, as well as Help to Build, there are other options of funding your own build, depending on the borrower’s ability to repay the loan. This could be through an advance from an existing lender, a self-build mortgage, or a remortgage, bridging loan or other types of property finance from a specialist lender.”
Duncan Hayes, a spokesperson for the National Custom and Self-Build Association (NaCSBA) said: “When considering options for garden plots it is important to understand the approach of the local planning authority. The right proposals in the right areas can help with the delivery of better and more sustainable homes that we urgently need.
“Care is needed as many will have specific policies to prevent inappropriate development of gardens that may cause harm to the local area. NaCSBA recommends that anyone wanting to build should sign their local self-build register and check out the planning policies on their local council’s website in regard to creating new dwellings in a garden.”
Andrew Baggot, managing partner and chartered accountant at Clarke Nicklin, adds: “As far as tax is concerned there are a few matters to bear in mind with a self-build project. As well as the tax benefits, there shouldn’t be any Stamp Duty Land Tax (SDLT) to pay on the self-build, on the basis that it is being built in the owner’s own garden.
“However, one tax that might need to be considered in more detail is Capital Gains Tax (“CGT”). Your primary home is exempt from CGT. Although, as soon as you’ve acquired a self-build home you then have two properties, only one of which can be exempt from CGT. It’s therefore important to plan ahead if you’re then thinking of selling one of the properties so that you minimise any tax that might become payable”.