How the help to build scheme could fund your self-build | moneyfacts.co.uk

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Published: 04/06/2021

At a glance

  • The Help to Build loan scheme offers £150m in loans to boost deposits for self-build mortgages
  • The average maximum LTV for self-build mortgages in England and Wales is 70%

 

What is the Help to Build Scheme?

The Help to Build Scheme is a new scheme announced by the Government in April 2021. The scheme provides £150m in the form of loans to those wanting to get a self-build mortgage. On average, self-build mortgages (excluding remortgages) in England and Wales have a maximum loan-to-value (LTV) of 70% . The Help to Build Loans reduce the buyer’s deposit down to 5%, and you take out a self-build mortgage with a registered mortgage lender while the house is being built.

Once the house is built, the Help to Build equity loan is paid to the mortgage lender by the scheme. The loan needs to be repaid to the Government when your self-build mortgage matures, but have a standard term of 25 years.

You can spend up to £600,000 on your new home which 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.

The equity loan element is available up to a maximum of 20% of the build cost outside of London, or 40% in London.

The equity loan is interest free for five years, after which interest is charged at 1.75%, which increases each year by CPI plus 2%.

How does the Help to Build Scheme help those starting a self-build project?

The scheme makes building your own house more affordable by reducing interest payment for at least five years after the house is built.

 

How long with the Help to Build Scheme last?

The scheme is expected to last for four years.

Why use a specialist self-build mortgage?

There are mortgages available as dedicated self-build mortgages, while other lenders will accept a self-build project using their standard mortgage product. The advantage of a specialist self-build mortgage is that you can drawdown money from the agreed mortgage amount in stages, for example to buy the land, complete the foundations. This is instead of borrowing the whole amount up front and then starting to incur interest on the whole balance from day 1.

Which lenders accept Help to Build loans as part of their mortgage range?

Unfortunately there are very few lenders participating in the scheme.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

 

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • The Help to Build loan scheme offers £150m in loans to boost deposits for self-build mortgages
  • The average maximum LTV for self-build mortgages in England and Wales is 70%

 

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