The UK 's Help to Build finance scheme for self build mortgages with high LTV/ Loan to Value and just 5% Deposit

The UK's Help to Build scheme was initiated to support individuals who wish to build their own homes by making self-building more accessible and affordable. Below are some of the pros and cons associated with this scheme.

In the Help to Build scheme, eligible individuals can currently spend up to £600,000 on their new home, which must include the land cost unless already owned, with a cap of £400,000 on construction costs. To qualify, individuals must be 18 or older, have a right to live in England, plan to reside in the newly-built home as their sole residence, and secure a self-build mortgage from a lender registered with the scheme​.

We understand that as of October 2023 the Help to Build scheme is under review and may well have changes made to it. Hopefully this improves the scheme and its availability rather than limits it.

Pros:

1. Government Support

   The scheme is backed by the UK government, which has set aside funds to help lower the mortgage rates for self-build projects.

2. Lower Deposit Requirement

   Typically, self-build mortgages require a hefty deposit, but with the Help to Build scheme, individuals can get a mortgage with only a 5% deposit.

3. Equity Loans

   The scheme provides equity loans similar to the Help to Buy scheme, making it easier for people to secure the necessary funding. In London, the government tops up a 5% deposit with an equity loan of up to 40%, while in other parts of England, the equity loan is up to 20%.

4. Interest-Free Period

   The equity loan is interest-free for the first five years, which can significantly lower the cost of building a home in the early years.

5. Encouragement of Custom Builds

   This scheme encourages the custom building of homes, allowing individuals to create homes tailored to their needs and preferences.

Cons:

1. Limited Scope

   The scheme only applies to custom or self-build homes in England, leaving out other parts of the UK.

2. Cap on Property Value

   The scheme has a cap on the property value, which might not cover the cost of building in certain high-cost areas.

3. Complexity

   Self-building a home can be a complex and daunting task, especially for individuals without prior experience in construction or real estate. Even with the financial support from the scheme, the process of self-building can be challenging and time-consuming.

4. Potential for Increased Costs

   While the scheme aims to lower upfront costs, self-building can often lead to unexpected expenses that can make it more costly than buying a pre-existing home.

5. Market Risks

   The market value of self-built homes can be unpredictable, and there's a risk that the home's value might depreciate over time, or not appreciate as much as a pre-built home would.

The Help to Build scheme is a significant step towards making self-building a viable option for more people, but it also comes with challenges that prospective self-builders need to consider.