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Help to Build explained

The government’s much anticipated Help to Build equity fund, announced on Saturday, gives selfbuilders the chance to tap into similar benefits enjoyed by those in the Help To Buy scheme.

The latter, which requires the equity loan on a new home to be paid on completion to the developer, cannot be easily adapted for custom and self build where multiple payments are usually made to different parties. Without this scheme, access to low-deposit loans is limited, with customers typically needing to stump up a 20 per cent deposit.

While full details of the government’s scheme remain sketchy, the National Custom and Self Build Association (NaCSBA) has been lobbying the government for some time for equity funding for the sector to end what it sees as the current unfair playing field between selfbuilders and first-time buyers of developer homes who qualify for the Help to Buy scheme.

NaCSBA has been working with 12 lenders to develop a workable Help to Build model to not only help those looking to build or commission their own home but also help SME builders with their cashflows during the build. 

Under the NaCSBA model, mortgage lenders provide funding for up to 95 per cent of the build costs, enabling selfbuilders to proceed with just a five per cent deposit, as with Help to Buy. Similarly, upon completion, the government provides 20 per cent of the cost of the property but in this case the payment is made to the lender and not the developer.

In both Help to Buy and Help to Build schemes:

• The homeowner has funded five per cent of the cost

• The mortgage lender has outstanding finance of 75 per cent of the cost

• The Government has funded 20 per cent of the cost

As a self build is usually worth more than the cost of the project – a developer-built home typically falls in value – the risk of the scheme is reduced. Furthermore, a self-build mortgage provides finance throughout the build and so reduces the need for more expensive funding for builders, in particular SMEs and suppliers.

The scheme, like Help To Buy, will run for four years. A Help to Build prospectus is expected to be published shortly, with applications open from late summer.

26 April 2021

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