How does Help To Build work? Here’s the latest quick summary of how Help to Build equity loans will help you build a house with a 5% deposit from a presentation at Build It Live’s exhibition in Bicester, delivered by Homes England. I took a trip to the event to get the latest info for you.
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Transcript: Help To Build 2022 UK Government Scheme
Bear: [00:00:00] Good evening, my fellow bears. And if it’s not evening where you are, I’ll let you decide if I am too early or too late.
Homes England: Welcome to this session. My name is Sarah Slack and I work for Homes England, and that’s an executive agency that is sponsored by the Departments of Leveling Up and housing communities. So today I’m gonna talk to you about a new government service that’s being delivered, called help to build equity loan.
And I’m gonna talk you through a little bit about how it works.
Help to build is a government equity loan scheme designed to help people fund their own custom or self build homes in England. It aims to open up the market to a younger generation of builders. And initially it’s a four year program, which will provide over 150 million pounds worth of funding, which is hoping to help remove some of the financial barriers and could create up to over 2000 new custom and self build homes over this period. The scheme is managed by Homes England. And, um, as I [00:01:00] said earlier, we are an executive department. Um, that’s sponsored by the department of leveling up and housing communities. So help to build our aims are to make building homes a more accessible option.
This scheme has three key audiences and customers. So number one is the custom and self builder. So it’s those people who want to build their own home and who want to engage with their own subcontractor or choose to work with custom or shell builders. Help to build will make building homes a more realistic choice for a younger generation as it provides additional funding to help them, even those who have that smaller deposit. The second key customer for this scheme is specialist and self build mortgage lenders as the scheme helps to reduce the financial risk that the lender is taking, and the equity loan is paid straight to the mortgage lender at the point of build completion, this reduces [00:02:00] that loan to cost value.
So who’s eligible? Like other schemes that are funded using public money, help to build has eligibility criteria and the terms and conditions apply. So I think some of these are really self explanatory around our eligibility criteria, but just wanna point out that you are more likely to hear about this scheme through, um, a builder or a mortgage lender or an independent financial advisor.
We do encourage anybody who’s looking to this scheme to seek independent advice before entering into it. Um, and before anybody can take advantage of this scheme, you must, uh, make sure that you’re eligible. So to be eligible, as it says there, you will need at least a 5% deposit, this is your contribution towards the cost of the build.
There is an online application form that captures your information [00:03:00] and it’s through that online application that we’ll confirm your eligibility during the build and how the scheme would work and how you’d work with your, with your lender and after the build, how that scheme, uh, is calculated.
So if it is a scheme that you are interested in, we have a number of experts on hand today at stall C8, just next to us. And we can talk through the detail of that, the equity loan and that here. So help to build, it’s not a discount on the price of the home. The land and the build cost of the home will be the same with or without the equity loan.
Homes England: If you’re eligible for the equity loan, the maximum you can spend on a build is 400,000 pounds. An additional hundred thousand pounds can be included for the cost of the land, but that’s only if it’s needed. You may already own the land. Okay. So the total maximum amount eligible is 600,000 pounds.
Customers are expected to pay the equity loan at the [00:04:00] end of the term, this is normally 25 years, and or when you sell the home or if you decide to repay it at any point before then.
Equity loans work slightly different to a mortgage. So here’s some key things to know before taking out an equity loan. So no interest is charged for the first five years of the equity loan. Interest will start from year six, but interest payments do not go towards repaying the loan throughout the first five years.
There’s a one pound monthly management fee for the life of the equity loan that will get charged throughout that first five years. And there may be some other fees and third party costs associated if you want to make changes to your equity loan in the future. The amount that you do eventually pay back,
it’s worked out as a percentage of the home’s market value at the time it’s repaid rather than the amount originally [00:05:00] borrowed. And if the market value of the home, rises above the estimated land and build costs, so does the amount that is owed on the equity loan.
But we do have time for any questions. If there are any?
Audience: Can you start repay as soon as your bill is complete?
Homes England: You can.
Audience: Or do you have to wait from when your home has been revalued at the market rate?
Homes England: So at completion, you will move from a self-build custom mortgage to a repayment mortgage.
At that point, your property is valued. You can choose to repay at that point. You can choose. So once it’s complete, you can choose to repay your equity loan. You can choose to keep it for the five years with interest free and then you can choose to repay. And then throughout, there are certain amounts you can reduce the amount of the equity loan as well.
By certain amounts like 5% or 10%, you can bring it down, if you took the full 20% equity loan.
Audience: Mm-hmm . Yeah. Does the value of your… would that change [00:06:00] then? What, what you’re made to repay, does that change based on market movements? So if the market… if the market value in your house then increases…?
Homes England: Yeah.
That’s, that’s what the, um, equity loan repayment is based on, the market value at that time-
Audience: That initial market, right?
Homes England: Not the initial one at the start. At the point you want to redeem. Yeah. Completely. Yeah.
Another one. Okay. That’s a really good question. When it goes live. So we we’re ready to go live. We’re a government service. We’ve stood up the team. The digital service is all there ready and waiting.
Homes England: We’re waiting for the government announcement and we are hoping that it will be this month.
Audience: so in terms of it being an equity loan, does that mean that you own part of the house? And what does that mean for us if you took it?
Homes England: Yeah. So as, as being an equity loan, we will be a second charge lender. So your first charge lender will be your mortgage provider. Being a second charge lender, that will be noted on land registry deed records.[00:07:00]
Audience: so with the build cost, is it the loan that you provide… is that in arrears or is that in advance of the building works?
So for this service, now you need to be at the start of your journey and it’s for people who need to take out that mortgage to do the build. So it’s expected that it’s upfront and you start that
journey with the mortgage lender and they will provide you the money at regular intervals to complete your build.
Is that, do you know, is that in advance of every build stage? Do you know? Or-
Homes England: IT would depend with your mortgage lender on what you agreed with them on what the release points were of the money.
Yeah. I, I can’t give a advice on mortgage lenders if, uh, if you’ve got further questions on mortgages, BuildStore are here. Did a presentation earlier about financing and sort of the different types of self-build loans that are available. Um, but you can [00:08:00] speak to them directly. Just ask a few questions.
Audience: Do you have a list of who’s gonna be on the Help to build…?
Homes England: I believe Build Store covered help to build in their presentation so they will be able to, to help you sort of find who’s gonna be a part of that.
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