Self Build Projects
Building a home is a unique opportunity that many of us may not even consider, but for individuals like you who are considering building your own home; it can be an exciting journey completing in a substantial investment you get to call home. However, getting the right funds to finance your project can be a barrier to entry and often an end to most ideas. This is why our specialists are highly recommended for having access to the right lenders who can assist your build. So how do people afford it? Usually projects like these are funded by a combination of savings and a self-build mortgage.
What is A Self Build Mortgage?
A mortgage for a self build differs from a mortgage you would use to buy a house because with a self build mortgage the money is released in stages as the build progresses. There are however different ways in which this money can be released and your choice of product will depend on your own particular circumstances.
As a result of the credit crunch, lenders are now more cautious and it will pay you to get your finances in order, to put you at an advantage when making an offer for a plot or renovation property.
In common with the mortgage market in general, there are fewer lenders available and fewer still who will lend for self build, renovation or home improvement projects. The amount many lenders will lend as a proportion of your cost for the land or property and the build or renovation is lower than it was two years ago. The criteria they apply may be more restrictive: for example, some will only lend on projects in their local area; or they may lend for only certain designs or construction types. Some may require the build to be completed within a set timescale. Then there are the differences between lenders’ calculations of the affordability of your project, and the way they treat your existing mortgage commitments and this why expert advice on your self build project can give you a huge advantage for both your finances and your timescales.
Types of Self Build Mortgages
There are two types of self build mortgage each defined by when you get money during the build. They are called
The traditional type of self build mortgage is on an ‘arrears’ basis. With this type, the lender will release money to buy the plot, usually between 50% to 85% of the purchase price or value of the land and then will release the money for the build in stages to correspond with the build stages outlined above. The money for each stage is paid out at the end of the stage once the work has been completed and a valuer has visited the site i.e. in arrears of the work being done.
An arrears self build mortgage is best suited to self builders who have sufficient savings to fund the early stages of the build as well as sufficient savings for the deposit on the land. For example, if you already own the plot of land and can remortgage it to provide the funds to start the build or if you have already sold your existing house and have cash available to buy the land and start the build then an arrears mortgage may be the best option for you.
However at Safe Finance we recognise that each individual’s have different needs and that’s why our experts can help build your financial plan around the construction of your project. Our highly recommended self build specialists will take the time to understand your mortgage requirements around your expenditure and your cash-flow during your build.
What are the typical Stages of a Self Build Project?
Every self build project has identifiable stages from the initial digging of the foundations to the final fix and at each stage the value of the build increases. To give you an indication the chart below demonstrates
Whatever your needs may be, you can be assured that the expert advisors at Safe Finance will discuss your requirements in detail and will only recommend a particular product once they have fully understood your circumstances.