New Help to build mortgages

If you are in the market for a new house, you will probably have heard of the ‘Help to buy’ mortgages. These are Government supported schemes which mean that you need to raise less money for a deposit. 

There are two main routes:

Help to buy equity loan

(where the Government effectively owns a part of your home).
This has proved very popular and over 270,000 properties were bought with the Help to Buy: Equity Loan scheme between 2013 and 2020.

Mortgage guarantee scheme

From 19th April, you will be able to buy a home with only a 5% deposit (with certain other rules – such as being a first time buyer and the home being worth less than £600,000). This is to support a lack of 95% loan to value mortgages in the market.

What about self and custom build?

Both of the above schemes do not help you if you want to build your own home or if you want to buy a shell and fit it out yourself.

The Government is committed to these alternative routes to owning your own home and has announced the Self and Custom Build Action Plan.

The plan aims to help grow the self and custom build sector by:

• helping provide financing to both self and custom builders and to developers
• increasing to land through brownfield as well as Right to Build legislation
• gathering data about self and custom build so that we can plan for the future of the sector, and 
• expanding knowledge and expertise through the continued funding of the Right to Build Task Force.

What is Help to Build?

The Help to Build equity loan is £150m of funding that the government has announced to help more people build their own homes. The initial package was confirmed on 24th April and the prospectus will be published sometime in the spring. 

Housing Secretary Robert Jenrick said, “Building your own home shouldn’t be the preserve of a small number of people, but a mainstream, realistic and affordable option for people across the country. That’s why we are making it easier and more affordable – backed by over £150 million new funding from the government. The scheme we have launched today will help the thousands of people who’d like to build their own home but who’ve not yet considered it or previously ruled it out.”

We don’t have any details – but here’s what NaCSBA (National Custom and Self-build association) think it could be:

• You apply for a self-build mortgage in the normal way. Instead of needing a deposit of 15-20% (which tends to be normal in these kinds of mortgages) you would only need a deposit of 5%. Everything else happens in the same way as it does with a normal self-build and custom build mortgage. 
• First off, you buy the land (at Golden Brick) with some of your money and some of the money from the mortgage lender.
• Then you employ the builders or the custom build developer to build your own home and the mortgage lender pays you to pay them.
• Once the build is complete, the Government pays 20% directly to the mortgage lender to reduce the amount they have lent to you.

Who will be eligible?

We’re not sure, but we think that it will be purchasers buying homes for less than £600,000 and it may be restricted to first-time-buyers.

How can I find out more?

At the moment, there are no other details so please register and we’ll let you know as soon as something is announced and we will update this blog post. The government has planned for applications to be open by late summer.

Where can I buy a help to build product?

The best places to look are the portals (Rightmove, Zoopla etc.) and you may want to look at the smaller plot-focused sales websites: plotbrowser, plotfinder etc.