A new first-time buyer scheme designed for people who want to build their own home has opened for applications today.
Help to Build allows successful candidates to build or commission a house with a 5% deposit towards land and building costs.
The average cost of a deposit for a self and custom build is normally around 25% - meaning most people are currently priced out of building their own home.
The 5% deposit would need to be with a lender registered with Help to Build, which is only available in England.
Once approved, applicants would then be able to borrow an equity loan of between 5% and 20% - or up to 40% in London - once the work is completed.
This in effect reduces your overall mortgage - but the equity loan does need to be paid back.
No interest is charged on the equity loan for the first five years. You start to pay interest from year six, at a rate of 1.75%.
From year seven, the amount of interest you pay increases each April in lined with the Consumer Price Index (CPI) rate of inflation from September of the previous year, and add 2%.
The equity loan - which is provided by the Homes and Communities Agency (trading as Homes England) - is based on the estimated costs to buy a plot of land and build the home.
You must also pay a £1 monthly fee to manage the loan, starting from when Homes England gives the loan amount to your lender.
Total build costs cannot be over £600,000, or £400,000 to qualify for Help to Build if the land is already owned, and you must live in the property as a primary home.
Once approved, you’ll have three years from the date of your formal offer to build your home.
Your mortgage lender will check your build progress regularly and will release lump sum payments to you at different stages.
Help to Build has been announced by the Department for Levelling Up, Housing and Communities, with a £150million funding pot from the Government.
Applications for the scheme opened today (June 27) for those aged 18 and over in England - see more information here.
Housing Minister Rt Hon Stuart Andrew MP said: “Through the Help to Build scheme we will help thousands more people onto the property ladder by giving them the opportunity to build homes that are perfectly tailored to their needs and in the communities they want to live in.
“This innovative scheme will build on our work to break down the barriers to homeownership, as well as creating new jobs, supporting the construction industry and kickstarting a self and custom build revolution.”
Richard Bacon, MP for South Norfolk and author of the review commissioned by the Prime Minister which recommended the Help to Build scheme, added: “There is clear evidence that getting people more involved in decisions about housing helps to deliver houses that are better designed and better built, which are greener and cost less to run and which communities are happier to see built.”
