Help to Build scheme — Everything you need to know

According to research by the National Custom and Self Build Association, around 1 in 3 British adults have ambitions to build their own home. But of those, 59% said that finding the money to fund the project was their biggest barrier. The government has identified self and custom-build houses as a key way of improving access to the property ladder.

That barrier is the reason behind the government’s new Help to Build scheme, which aims to make custom and self-build homes more accessible and affordable. But what exactly is the scheme, and what help does it offer prospective self-builders? In this guide we’ll take you through everything you need to know about Help to Build, and how it can bring your dream home a step closer to reality.

What is Help to Build? 

Announced in April 2021, the Help to Build scheme comprises £150 million of government funding set up to reduce the upfront costs associated with self-builds. This should be hugely beneficial to first-time buyers, young people, and those on lower incomes trying to get onto the housing ladder. Taking the form of a government equity loan, the government aims to not only increase the supply of affordable housing but to hasten the diversification of housing. In essence, the government tops up your deposit and secures the mortgage you use to build your home. This improves the interest rates available to you because there's less risk to the lender.

In 2020, the average cost of a self or custom build home in the UK was £460,000, with £190,000 of that accounting for the land and the rest for the build itself. Housing Secretary Robert Jenrick says the Help to Build scheme aims to change that, making self-building a “mainstream, realistic and affordable option for people across the country”.

As well as helping self-builders, the scheme is also set to boost the housing sector. It's hoped that self-builds will create between 30,000 and 40,000 new homes a year — compared to just under 16,000 in 2020 — and also increase business for small building firms.

Am I eligible for the Help to Build scheme?

In order to secure a low-deposit loan (as low as 5% deposit) from a lender, secured by the Help to Build scheme, you'll have to fulfil a few of the below eligibility criteria:

• be 18 or above and have the right to live in England
• your newly built home will be your only property, and you'll be living in it once it's built
• have obtained a repayment mortgage from a lender registered to the Help to Build scheme, for the rest of the cost of the project
• most lenders will require that you have outline planning permission on the land you want to build on before they assess your mortgage request
• you'll also be subject to standard credit checks, as well as confirmation you can afford the future equity loan payments

The scheme covers "self and custom build" houses - this does not mean you have to build everything with your own hands. 'Self build' properties are ones where you organise every aspect of the project (e.g. buy building materials and hire contractors to build). This contrasts with a 'custom build project', where you work with a professional homebuilder who manages the whole project for you. A compromise between the two would be a 'shell build' project - where a professional to build the structure of the home (e.g. foundations or roof), and you design and organise the internal layout (e.g. room sizes or features).     

If approved, you will have three years to find your dream plot of land and build your home on it.

How will the payments work?

This equity loan scheme will enable people to get a self build mortgage with a deposit as low as 5%, rather than the usual 20%. With less money required for an initial deposit, the scheme significantly lowers the financial bar for custom and self builders. The equity loan can be for an amount between 5% and 20% (up to 40% in London) of the total estimated cost of your self-build project. This total goes up to a ceiling of £600,000 (no more than £400,000 of which can go on the cost to build it, with the rest going towards buying the land. More precisely, during the build, you can receive £380,000 for housebuilding costs and the remaining £20,000 towards the deposit.

If you're confirmed on the scheme, have found your plot, obtained outline planning permission and a mortgage from a verified lender, you can start to build. The mortgage lender will release funds at various stages of the build, until your home is finished. Once the build is complete (build time is limited to 3 years), your mortgage lender will receive the government-backed equity loan - e.g. if you agreed with the government for loan of the maximum 20% (40% in London) of total build costs, your lender will be paid 20% of what they paid you, by the government, there and then. This greatly reduces their risk as it ensures they will receive a large portion of their lent money. In essence, the government is topping up your deposit, upon completion of your house.

How to apply

If you're planning on applying for a Help to Build loan, you'll need to have collected some information about:

• the terms and provider of your mortgage
• your legal adviser is
• you and your income
• the land and the home you're building

Mortgage Information

- Proof your lender has offered you a mortgage
- the amount of money you'll be borrowing
- how many years the mortgage will be for
- the name of the bank or building society you expect to provide the mortgage
- the name and contact details of your mortgage broker or financial adviser, or the name of your mortgage lender
- the mortgage deposit you intend to pay (this must be at least 5% of the estimated cost of the land and build)
- Any outstanding mortgage that you may have

Your legal adviser
For the application, it's compulsory to have a legal adviser. A good solicitor can also help you with all your title deed related issues. Once they've taken you on, you'll have to provide the government

- Their name
- their company and business address
- their email address and phone number

You and your income

- Your addresses from the past 3 years
- Any sources of income (e.g salary, bonuses, investments, pensions, additional funding etc.)
- Any monthly benefits
- Any debts you owe

The land and home you're building 

- The type of project you're planning, a breakdown of responsibilities, and the dates you plan to start and finish the project
- Estimated land and building costs
- The address or written description of how to find the plot
- the LPA the land sits in
- the type of home you're building and how many bedrooms it'll have
- its tenure (e.g. freehold, leasehold or commonhold) and monthly service charge & ground rent, if applicable.

You can use Addland to find a lot of this information, effortlessly and completely up to date. For example, our Research tool lets you see the address of every single plot of land in England and Wales, as well as its tenure and any LPA (and other) boundaries it lies within.

On top of all of this information, you'll need outline planning permission granted by your LPA. Once you've acquired all of the above, you can use the Government application page to apply.

Terms, repayments and associated costs 

As an equity loan from a government scheme, if the value of the house changes, so too does the government's share of its equity, though it will always remain the same in % terms. For example, if you've borrowed 20% of the project cost, worth £50,000, and the value of the house goes up after it's completed, you will owe 20% of the new value, rather than the original £50,000. Conversely, if the value falls, so too will the repayment value. The equity loan is:

• Interest free for the first 5 years
• From year 6, you'll pay monthly interest of 1.75% of the equity loan amount borrowed
• This interest will go up in April every year, by the Consumer Price Index (CPI) plus 2%. If the CPI is 0 or less, the 2% increase will still stand. So, the minimum increase per year would be 2% interest.
• The government also required £1 monthly 'management fee' every month until your equity loan is repaid
• Standard loan term of 25 years, though if your mortgage deal is for more than that, the government will extend the term of the equity loan to match it)

Another thing to keep in mind is that the Help to Build loan doesn’t protect you from the infamous self build problem of going over budget. You’ll still need to set aside contingency finances for if things go wrong. For more on the expenses you might have to plan for, see our guide: How much does it cost to build a house? In fact, a registered lender may require you to set aside a contingency budget before they approve you for the self or custom build mortgage. The scheme will run until about 2025 and you can register your interest here.

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