UK Government Launch £150m Fund To Help People Build Their Own Home
- Francesca Baccarella
5 minute read...
Great news, the government has unveiled a new £150m fund to kick start a self and custom build home revolution called the Help To Build Scheme only requiring 5% deposits. The UK has been struggling for years to cope with the housing demand but with this new finance, the government estimates that self and custom build could add between 30,000 and 40,000 homes a year to tackle the country’s home development crisis.
In 2016, the Right to Build legislation was brought in to help custom builders overcome the most common hurdle, finding a plot of land. Under the scheme, local authorities are required to log requests for plots on a dedicated Right to Build register and in the process help more self-build opportunities to come forward for those who have an interest in building their own home. However, with local authorities struggling to keep up with this legislation, the government is stepping up and putting in place new measures to boost the self and custom build market which will help individuals and small businesses alike.
The key barriers for people building their own home are; finance, finding a plot, expertise and time. With this new fund, finance will be made more achievable through lower deposit mortgages. For those who are worried they do not have enough experience in the field to take on a self-build or simply do not have the time to manage such a project, custom build homes are the way to go. Previously, self and custom build has been seen as unaffordable and unrealistic to the mainstream market however this industry is changing for the better and specialist companies such as Stellco Homes are here to make it a reality for the masses.
Many people dream of building their own home yet self and custom build only make up 7% of the UK housing market. Compare this to the rest of the world where more than 40% of houses are self and custom build and you will see how far behind the UK has become in our housing options. That's why this fund is accompanied by the governments Self and Custom Build Action Plan, published April 2021, which outlines the key barriers they wish to address and their timetable for implementing these changes.
If you have also dreamed of living in a house that has been designed by you, Stellco Homes may be able to help. Visit our blog Self Build vs Custom Build to find out more about which option may be right for you.
The Government have recently published an equity loan guide to help fund your custom or self-build home making building your home more affordable. Applications for the Equity Loan will open this 2021 winter. All people over 18 living in England will be eligible. Most lenders will need you to have outline planning permission for the land you want to build on before they assess or approve your self-build mortgage. You’ll need to ask your preferred lender about this before you apply. The key things to know about Help to Build are:
- Custom build and self-build homes Help to Build loans are not just for people who have not owned or built a home before.
- The offer of an equity loan is based on the estimated costs to buy a plot of land and build the home. The equity loan amount can be between 5% and 20% (up to 40% in London) of the total estimated cost.
- If you’re eligible, you can spend up to £600,000 on your new home. This must include the cost of the land if you don’t already own it, and no more than £400,000 on the cost to build it.
- You will have 3 years to buy the land (if needed) and build your home.
- Your mortgage lender will release funds to you at various stages of the build, until your home is finished.
- You’ll need a deposit of at least 5%, and need to meet other eligibility criteria to use the Help to Build, Equity Loan scheme.
- Help to Build is not a discount on the price of the home - the land and build costs of the home will be the same without an equity loan.
- The equity loan is not interest free. Interest is not charged for the first 5 years, but you will start to pay it from year 6.
- The total amount you repay at redemption is linked to the value of your home at the time, and not the amount you originally borrowed.
- You must repay your equity loan at the end of the term (normally 25 years), when you sell your home, pay off your mortgage, or you can repay at any time before.
- You’ll pay a £1 monthly management fee for the life of the equity loan.
- When you apply for the equity loan, your self-build mortgage must be provided by a lender registered with Help to Build. Once your build is complete, your self-build mortgage will automatically switch to a repayment mortgage which must be in place for the duration of the equity loan.
- You only get your equity loan and start to pay fees for it after you’ve built your home. When your build is complete, the government will pay your mortgage lender the equity loan amount that was offered, and your self-build mortgage will automatically switch to a repayment mortgage.
This guide is for information only and must not be considered advice. You must get independent financial advice about whether Help to Build is right for you. More information is available on the government website: Help to Build: Equity Loan prospectus.
Assessing appetite for local demand for owner commissioned homes can be a challenge for housebuilders, so to complement the local authorities’ self-build registers Stellco Homes is hosting its own register for anyone wishing to build locally in Bedfordshire, Buckinghamshire, Cambridgeshire and Hertfordshire which is beneficial for both parties. Not only will this build a list of ready customers, but it will also identify desirable locations where people would like to build, giving us the confidence to bid for sites that may be beyond the reach of the average buyer trying to secure land independently. Sign up to our register HERE. However, we also encourages prospective buyers to sign up to their local authority’s registers, too, via www.righttobuildportal.org.