What is the Help to Build Scheme?
Anyone building their own home or hiring someone to build a home for them may be able to apply for a government loan under the Help to Build Scheme. This loan can cover part of the building costs and part of any land purchase costs. It is known as a ‘Help to Build Equity Loan’.
Being approved for such a loan also allows self-builders to access mortgages with lower deposits and lower mortgage rates via lenders, with the intention that the freed-up capital can be used on building costs.
This method is an alternative option to get first-time buyers onto the housing ladder and could contribute to adding 30,000 - 40,000 self and custom-built homes a year to the UK housing stock.
Applying for the Help to Build Scheme
Who can apply for a Help to Build Equity Loan?
Anyone building their home can apply provided they:
are at least 18 years old
have the right to live in the UK
will live in the newly-built home as their only home
have a deposit of at least 5% of the estimated cost of the land and build, and
secure a self-build mortgage (or self-build mortgage offer) from a lender who is registered with Help to Build
An application cannot be made by someone who:
has already received funding from another Help to Build Equity Loan within the last 2 years
still owes money borrowed from another government home ownership scheme
How much will the loan cover?
Under the Scheme, loans can cover between 5% and 20% of estimated land and home building costs. In London, loans can cover up to 40% of estimated land and home building costs.
The estimated costs cannot be more than:
£400,000, if a home is being built on land that is already owned
£600,000, if the land needs to be bought (the build cannot cost more than £400,000)
The cost estimation does not include VAT paid on building costs (or anything else) or money set aside in case the build goes over budget.
How can I apply for the Help to Build Scheme?
Anyone who meets the Scheme’s eligibility criteria can make an application. An application can be made by one person alone or by up to 4 people applying together.
Before making an application, certain information needs to be gathered to provide when applying. This includes details about the:
applicant(s) and their incomes
land and the home the applicant(s) are building
Applications to the Help to Build Scheme can be made online or by post. For more information, see the government’s guidance on how to apply for the Help to Build Scheme.
Repaying a Help to Build Equity Loan
Is interest payable on the loan?
For the first 5 years, interest is not payable on the loan. Monthly interest becomes payable starting 5 years after the date shown on the mortgage document.
In year 6, interest is charged at 1.75% of the loan amount.
From year 7, interest increases annually in April by reference to the Consumer Price Index (CPI) plus 2%. For example, if the CPI was 2.5%, the interest rate would be 1.83%. This is because:
2.5% (CPI) + 2% = 4.5%
1.75% (the previous year’s interest rate) x 4.5% = 0.08
1.75% + 0.08 = 1.83%
Note that interest payments are not loan repayments and, therefore, do not count towards paying back the capital of the loan.
For more information on how interest on the loan is calculated, see the government’s guidance.
Are other fees payable?
To manage the loan, a monthly fee of £1 must be paid. This starts on the day Homes England provides the loan amount to the mortgage lender. The monthly fee is collected by someone appointed by Homes England to manage the loan. They are known as the ‘equity loan administrator’.
How is the loan repaid?
The loan doesn’t have to be repaid until the loan ends. This will happen if:
the term of the loan is over (the term is typically 25 years)
the home is sold
the mortgage is paid off, or
the terms of the loan are broken
The loan can be partially repaid at any time in order to reduce the final loan amount. These repayments have to be worth at least 10% of the home and land’s market value at the time the repayment is made.
The final repayment amount is based on the home and land’s market value at the time of the final payment and the number of one-off repayments that were previously made.
For more information, see the government’s guidance on repaying the loan.
How long will the Scheme be available for?
In support of the Scheme, the government has pledged £150 million in funding to be allocated across 4 years. The Scheme is expected to run until 2025.
For more information on the Help to Build Scheme, see the government’s detailed guidance on the Scheme.