SELF BUILD MORTGAGE

If you are confident and skilled enough to build your own home you should be able to construct a property that will fit your requirements better and cost less than buying from someone else, such as a developer or builder. However, financing this type of project can be a real issue.

Irrespective of your credit status or employment situation our specialist brokers will be able to provide you with a range of different types of self build mortgages and loans to suit your particular circumstances and project requirements. They will provide you with professional and impartial advice. It is provided free and without obligation. So call us now if you are interested in a self build mortgage for a property in the UK.

What is Self Build?

Self-build refers to any major residential construction project that you undertake to manage or do yourself. You may not necessarily physically do all the work your self and could easily employ contractors to do the build for you. But you will basically be in control of everything that happens during the construction.

Examples of self build include building a brand new home on a plot of land, renovating a older property, converting a building into living space or a major extension to your existing home.

The major difference between a normal house purchase mortgage and a self-build loan is that for self-build your cash is released to you in smaller individual payments at predefined stages in the construction process, rather than as a single lump sum.

It is estimated that about 20,000 people build their own homes in the UK each year so you are not alone. There are also many websites giving advice, plans and resources for your self build project.

How does a Self-Build Mortgage Work?

Payments to you from your self build mortgage lender can be made in one of two ways:

The more traditional way is that you will receive a staged payment only as you reach specific points of completion during the construction work. This way means you really have to fund each stage yourself before you get the money to pay for it. This option is referred to as an arrears based mortgage.

The other way is basically the opposite and you will receive a payment before each stage of construction. This is referred to as an advance payment mortgage. It means that you don’t have to fund any of the stages yourself thus greatly helping your cash flow situation.

This second option is obviously more attractive to the self builder as it means that if you don’t have sufficient funds of your own to complete the first stage then you won’t need an expensive bridging loan either. Mortgage lenders consider this option to be more risky and as such they can be harder to get.

The number of payment stages and the point at which they are payable can be variable or fixed depending on the lender you use. Normally, however there will be four or five fixed stages.

It should be possible to get from 65% to 95% the cost of the building from a specialist lender and between 25% and 80% of any land or building plot you my have to purchase first.

Anyone who already has a mortgage on their home and wants to stay there during the self build will have to inform the new lender of the situation, as you will obviously need enough income to cover both mortgage payments.

What is your Budget?

Whether your self build succeeds or fails you are probably going to be borrowing a fairly large sum of money, which you will have to pay back what ever happens.

You therefore need to plan your finances very carefully and include some contingency for when things go wrong. You need to very confident in your abilities if you are going to do the construction yourself or hire a good builder and skilled contractors if you are not.

You need to produce a detailed budget for each stage of your project including the initial stages such as buying the land and professional fees for surveyors and architects etc. You will then need to add these together to give a total budget for your project. Your mortgage lender will probably want to see a copy of this before approving your loan application.

Having a detailed budget will also prove whether your project is feasible or not and will be useful in highlighting things you may have overlooked.

Don’t forget to budget for the cost of insurance to cover you against the risk of something going wrong on your building site.