Help to build scheme

Last updated: March 2024 | 3 min read

Step into the world of custom home creation with the Help to Build scheme, a pathway for those embarking on their first home-building adventure. This guide unfolds the intricacies of constructing your dream home, seamlessly connecting with insights on shared ownership and the broader first-time buyer scheme. Discover how this unique initiative can transform your vision of a perfect home into reality.

Introduction to the help to build scheme

Overview of the scheme

The Help to Build scheme is a government initiative in the UK. It offers financial support to individuals aiming to build their own homes. Unlike traditional home buying, this scheme provides an equity loan. This loan assists with funding the land purchase and construction costs. The scheme aims to make self-building more accessible, addressing the housing shortage and diversifying the housing market.

Origins and purpose

Initiated by the UK government, the Help to Build scheme arose from a need to expand the housing market and encourage personalisation in home building. Its purpose extends beyond just financial aid. It seeks to inspire innovation in housing design and use of space, particularly focusing on efficiency and environmental sustainability. The scheme also supports aspiring self builders who might otherwise find the process financially prohibitive.

What exactly is the help to build scheme?

Key features of the scheme

The Help to Build scheme is a UK government initiative designed to support individuals who aspire to construct their own homes. It revolves around a government equity loan, similar to the Help to Buy equity loan, but specifically tailored for self and custom builds. Under this scheme, you can apply for a loan to cover a portion of your project costs, significantly reducing the upfront financial burden.

One standout feature is its inclusivity; it's open to both first time buyers and existing homeowners. Notably, the scheme is not confined to traditional residential properties but also extends to custom builds, reflecting a broader approach in housing solutions. Its flexibility allows for the personalisation of design and internal layout, catering to unique preferences and needs.

Differences from other housing schemes

Distinct from other housing schemes, the Help to Build scheme zeroes in on the self-build market. Unlike standard home-buying methods, this scheme addresses the specific challenges and expenses involved in building a home from scratch. The financial structure is also different. The government equity loan for Help to Build is specifically structured for the unique demands of self-building, differing in terms of release of funds and repayment conditions.

A pivotal difference lies in its impact on the self-build sector. The scheme aims to make self-building more accessible, thereby diversifying the housing market beyond conventional new-build homes. In contrast to schemes focusing on existing property purchases or new, developer-led homes, Help to Build encourages individual participation in housing design and construction. This personalised approach can revitalise unused space in urban areas, contributing to more innovative residential property development.

Eligibility for the help to build scheme

Criteria for applicants

To participate in the Help to Build scheme, applicants must meet specific criteria. This scheme is open to UK residents over the age of 18 who wish to construct their own home. Significantly, the property in question must be the only home you own and primarily for your use, not for rental or investment purposes. Eligibility extends to both first-time buyers and existing homeowners who seek to build their new residence.

For financing, the scheme necessitates that you secure a self build mortgage from a lender who participates in the program. This ensures that the financial aspect of your self-build project is supported and closely monitored.

Understanding your eligibility

Understanding whether you qualify for the Help to Build scheme involves a closer look at your circumstances and the nature of your proposed building project. Essential to this assessment is ensuring that the total estimated cost of your project stays within the set limits of the scheme. This cost includes not just the building costs but also the estimated land cost, and any related expenses such as securing outline planning permission.

The scheme particularly aims at assisting those who might struggle to afford the high upfront costs typically associated with self-building. Therefore, factors like your financial stability, credit history, and the projected feasibility of your self build project play pivotal roles in determining eligibility. Local authorities may have additional requirements or considerations, reflecting regional housing needs or conditions.

Application process for the help to build scheme

Step-by-step application guide

Applying for the Help to Build scheme involves a series of steps designed to assess your project's feasibility and your financial capability. You start by registering your interest on the Homes England website. Homes England oversees this government-backed loan scheme. Once you express interest, you'll receive detailed information and a list of required steps.

The next phase involves seeking pre-approval. This stage is critical to ensure your project aligns with the scheme's guidelines and goals. You need to submit preliminary project details including the estimated costs, your planned location, and basic design ideas. During this phase, the Help to Build task force might request additional information or clarification.

After preliminary approval, it’s time to focus on the finer details. Detailed plans, exact budgets, and proof of your own funding contributions are essential. This information helps in determining the equity loan amount you're eligible for. Your application then undergoes a final review. Approval at this stage means you can start looking for a registered lender.

Required documentation and approvals

Gathering the right documentation is pivotal for your Help to Build application. Start with a comprehensive budget outlining all expected expenses. This budget should include costs for materials, labour, and any professional services required for your self-build project.

You'll also need detailed architectural plans. These plans should comply with current building regulations and include specifications on sustainability and energy efficiency, reflecting the scheme's focus on eco-friendly building practices.

Proof of land ownership or a pending purchase is another critical requirement. If you're yet to secure a plot, a letter of intent or a reservation agreement can suffice for the initial stages of the application.

Next, provide evidence of your financial contributions. This proof might include savings accounts statements or a mortgage in principle from a to build registered lender. Remember, your own contribution influences the equity loan offer based on your project's total cost.

Lastly, securing planning permission is essential before final approval. While this can be a lengthy process, it ensures your project complies with local development plans and environmental regulations. With all approvals in place and your documentation ready, you’re set to take your self-build dream forward.

Choosing a self build mortgage with the help to build scheme

Comparing mortgage options

Self build mortgages differ significantly from standard mortgages. You receive funds in stages, not as a single amount. Understanding these differences ensures you choose a mortgage fitting your project's nature and timeline. Most lenders release money at key construction milestones. For instance, land purchase, foundation laying, and property completion are typical stages. The payment method, either in advance or arrears, impacts your cash flow. Advance stage payments provide funds at each phase's start, easing cash flow concerns. However, not all mortgage lenders offer this option.

Researching various self build mortgages under the Help to Build scheme requires attention to interest rates, fees, and repayment terms. Darlington Building Society and similar institutions offer specific self build products; compare these carefully. Interest rates on self build mortgages are usually higher than standard mortgages. Factor this into your budgeting. Fees can also add up. Valuation fees, arrangement fees, and exit fees vary between lenders. Check the fine print for any additional costs.

Think about your long-term financial stability too. After completing your build, some mortgages automatically switch to a standard repayment mortgage. Others might require you to switch lenders or renegotiate terms. Planning for these future financial shifts is crucial.

Working with lenders registered for help to build

Choosing a lender registered with the Help to Build scheme is essential. These lenders understand the scheme's nuances and can provide tailored advice. Begin conversations with potential lenders early. They can offer insights into how much you can borrow and the likely cost implications of your project.

Lenders will assess your creditworthiness, income stability, and the project's feasibility. Your choice of contractor and the detailed build plans can influence a lender's decision. They look for reassurance that the project is manageable and within a realistic budget. A well-thought-out, detailed project plan can improve your chances of mortgage approval.

It's also important to consider the lender's experience in the self build market. Lenders with a track record in this area are more likely to understand the unique challenges and timelines of building your own home. They can offer more flexible payment options and advice on managing the build's financial aspects. Remember, the lender is your partner throughout this journey. Regular communication and transparency about your project's progress can help maintain a positive relationship with your lender.

Choosing a self build mortgage with the help to build scheme

Comparing mortgage options

Self build mortgages differ significantly from standard home loans. With a self build mortgage, funds are usually released in stages rather than as a single amount. This release typically occurs during key phases of the build process, providing a structured financial flow. You should examine various mortgage products to determine the best fit for your project's needs. Most lenders offer interest-only payments during the construction phase, converting the loan to a standard repayment mortgage once the build completes.

Your choice might depend on various factors like interest rates, the flexibility of drawdown stages, and early repayment charges. Some mortgages offer more favourable terms for eco-friendly projects or innovative construction methods. Research is key, as the self build mortgage market is nuanced and offers a range of products designed to meet diverse builder needs.

Working with lenders registered for help to build

Securing a mortgage under the Help to Build scheme requires working with a lender registered with the programme. These lenders understand the scheme's nuances and can offer tailored advice and products. Darlington Building Society and other institutions offer specialised products designed for self builders using this scheme. Working with a registered lender can simplify the process, as they're already familiar with the scheme's requirements and can guide you through the application process.

Before approaching a lender, prepare detailed project plans, cost estimates, and evidence of planning permission. Lenders will scrutinise the feasibility and cost-effectiveness of your project. They assess not only your ability to repay the loan but also the project's potential to succeed. Clear, concise documentation and a well-thought-out building plan will make this process smoother. Remember, lenders' criteria can vary, so consider consulting with multiple financial institutions to find the most suitable deal for your self build adventure.

FAQs and additional resources

The Help to Build scheme raises several questions, especially among new applicants. Queries often revolve around eligibility, financial implications, and procedural steps. Here are some frequently asked questions:

What is the difference between the Help to Build scheme and other equity loan schemes?

The Help to Build scheme specifically targets self and custom builders, offering an equity loan based on the project cost. This contrasts with other equity loan schemes primarily focused on purchasing existing homes or newly built properties.

Can I use the scheme for renovating an existing building?

No, the Help to Build scheme is intended for new self-build or custom build projects. It does not cover renovations or extensions of existing buildings.

How does the consumer price index affect my equity loan?

The amount you'll repay on your Help to Build equity loan is linked to the market value of your home, which can be influenced by the Consumer Price Index. If the value of your home increases, so does the amount you owe.

What happens if I sell my home?

Upon selling your home, you're required to repay the Help to Build equity loan, calculated as a percentage of the sale price, equivalent to the percentage of the original loan to the project cost.

Are there restrictions on the type of property I can build?

The Help to Build scheme is flexible but requires local authorities' approval, and your project should align with certain criteria like affordability and environmental impact.

Further reading and useful contacts

For a deeper understanding of the Help to Build scheme, explore guides from the National Custom and Self Build Association. Publications by Housing Secretary Robert Jenrick also offer valuable insights.

Useful contacts:

  • Mortgage Lenders: Specialising in self-build mortgages knowledgeable about the scheme.

  • Local Planning Authorities: For guidance on planning permissions and regulations.

  • Building Associations: Provide practical advice and networking opportunities.

  • Builders and Architects: Essential for practical advice and achieving your design and budget goals.

Leverage these resources for a smoother self-build experience.

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