Self Build Mortgages

With a substantial increase in UK housing costs, more people are looking into building their own home. A self build mortgage may be the ideal choice. The self build mortgage, also known as advance stage payment mortgage, is a home mortgage where you buy a plot of land and finance the construction of a home.

Advantages

Building a house at cost gets better value for your money. With a self-build home, you only purchase the land. There is no stamp duty on building a house which saves you from making extra tax payments. The second major advantage is the cost. It is estimated that the cost of building your own home is about 2/3rds the cost of buying a house. Newly completed self-built homes are worth approximately 30% more the day the house is completed.

How Self Build Mortgages Work

With a self build, the money is released in stages rather than one lump sum. The borrowing amount depends on the lender. As the project progresses, money will normally be released at each stage. The money can be released at the beginning of each building stage, or at the end. Because choosing to have the money released at the end of each stage can lead to cash flow problems, having the money released before each stage is complete is often seen as economically beneficial.

The Best Self Build Mortgage

Find the best mortgage that meets your financial needs. With a conventional self-build mortgage, you have to fund the initial stages of your build yourself. During the build stage, interim valuations will be made before funds are released. Before any funds can be released, site insurances must be in place. With an advanced flexible self build mortgage, stage payments can be made in advance of each stage, which helps to you to prevent future funding problems.

The Advance Stage Payment Self Build Mortgage

As with a traditional mortgage, how much you can borrow depends on your ability to repay. Lending will generally be between 75 - 95 percent of the building cost. Some lenders provide a separate loan for the land. Other than buying the plot of land, you need the funds to cover the costs of each stage. Because you will not receive your funding until each stage is complete, this can lead to funding problems.

Flexible Advance Stage Payment Self Build Mortgages

This type of mortgage helps speed up the build. With a flexible advance stage payment self build mortgage, you do not need a bridging loan. Funding for building costs is released when full detailed planning permission has been approved. Legal issues that your Solicitor will discuss with you include planning and any restrictions, building conditions, easements, rights of access, conditions of title, environmental issues...etc.

Considerations

The finance for this type of property is not as clear-cut as that of a standard house purchase. Look into the availability and suitability of the mortgage and arrange borrowing so that the money is available when you find your site. It is a good idea to consult with a self build mortgage specialist.