Intro
The Home Build Loans scheme, known as the “Help to Build: Equity Loan,” is a UK government initiative designed to support individuals who wish to build their own homes.
The scheme aims to make self-build and custom-build projects more accessible by offering equity loans that reduce the amount of financing needed from traditional mortgage lenders.
By providing these loans, the government helps individuals manage the significant upfront costs associated with building a home, thereby encouraging more people to pursue self-build projects.
How the Loan Works
If you’re building a home or hiring someone to construct one, you may qualify for a government-backed loan to cover part of the cost, known as a Help to Build equity loan.
This guide outlines how to obtain the loan in England. There are different processes for:
- Getting help to build a home in Wales
- Getting help to build a home in Scotland
There is no government-backed loan for building homes in Northern Ireland. Information on raising money to build your own home in Northern Ireland is available separately.
What You Can Apply to Fund
You can apply for the Help to Build equity loan to:
- Buy land and build a new home on it
- Build an ‘airspace development’ flat (new properties built in unused space above an existing building)
- Convert a commercial property into a residential property
- Build a ‘custom shell home’ (where a professional constructs the structure, but you handle the design and interior layout)
- Demolish an existing property and replace it with a new home
You cannot use the loan to:
- Build more than one home
- Make upgrades to your home
- Build a second home (you must live in the new home and sell any other residential property you own within 12 months of completing the new home)
How Much Money You Can Get
You can only obtain an equity loan if you can also secure a mortgage for the home you want to build.
You can apply for between 5% and 20% of the estimated land and building costs for your home (up to 40% in London).
The estimated costs must not exceed:
- £600,000 if you’re buying the land and building your home (with the build itself not exceeding £400,000)
- £400,000 if you’re building on land you already own
When estimating your project’s cost, do not include:
- VAT on building costs or anything else
- Funds set aside for potential budget overruns (whether from you or the mortgage)
The Mortgage You Need
Your mortgage doesn’t need approval when you apply, but to begin your project and receive an equity loan, you’ll need a mortgage offer from a lender.
Consult with a lender to ensure you can secure the appropriate mortgage.
Your mortgage must be:
- A self-build mortgage (a mortgage for constructing a home yourself)
- From a lender registered with Help to Build (verify on their website or ask the lender)
Fees
You must pay a £1 monthly fee to manage the loan, starting from when Homes England disburses the loan amount to your lender.
The £1 fee is collected by the equity loan administrator appointed by Homes England to manage the loan.
Interest
Interest on the loan starts 5 years after the date on the equity mortgage document.
In year 6, you’ll pay 1.75% interest on the equity loan amount, divided into 12 monthly instalments.
For example, if you received an equity loan of £80,000, 1.75% would be £1,400. You’d pay 12 monthly instalments of £116.67, totalling £1,400.
From year 7 onwards, the interest amount will increase in line with the consumer price index plus 2%. Further details on interest rates are available.
Paying interest does not reduce the equity loan principal.
If You Miss a Fee or Interest Payment
You may incur recovery costs or additional interest on the amount owed.