SELF BUILD MORTGAGE
APPLICATION
Building your own bespoke home can be very exciting and demanding on both your finances and your time; but can also be very rewarding. Typically you will pay less than the cost of a similar house on the open market and you have a home like no other which will be personally designed to meet your needs.
Self build mortgages work very differently to the traditional mortgage; rather than getting all your money on completion; the lender releases it in stages to fund the construction. Different stages include purchasing the land, initial project costs and laying foundations, construction of the walls, professional fees etc. It is very important you have a detailed budget plan from the outset. One other thing to consider is the lender may not release the money until after each construction phase which needs to be taken into consideration when applying.
NOT A TRADITIONAL MORTGAGE
Self build mortgages work very differently to the traditional mortgage. How much you can borrow depends on the lender. Most lenders will lend no more than 75% of the cost of the land and around 60% of the build costs. Unlike a traditional mortgage when all money is received at completion; a self build mortgage, the lender releases the money in stages to fund the construction.
Different stages include purchasing the land, initial project costs and laying foundations, construction of the walls, fixtures and fittings, professional fees etc. It is very important you have a detailed budget plan from the outset. One other thing to consider is the lender may not release the money until after each construction phase which needs to be taken into consideration when applying.
CRITERIA
A Self Build mortgage is deemed to be more risky to the lenders and so they normally require a larger deposit up front of at least 30%, however anything above 30% would attract better deals. Lenders will assume you have all your planning permissions, building regulations and approvals, copies of architectural drawings and detailed project costings and cash flow projection ready before you approach them.
There is an expectation that you will employ professional builders/contractors to do the work. In addition, like a normal mortgage, lenders will check your affordability and request payslips, bank statements and complete credit checks.
ADVANTAGES
Not only will you have your dream home, Self Built homes are worth approx. 30% more on completion than they cost to build. Although you will tend to pay a higher interest rate on your mortgage because self builds are deemed more riskier, you can convert it to a traditional mortgage once completed; therefore reducing your interest rate.
Building your own home can save you thousands of pounds on stamp duty. This is because you only pay stamp duty on plots of land that cost more than £125,000, there is no stamp duty on the cost of the building work or the value of your home once it has been completed.
There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £195 but may range from £0 to £495.
You will not receive a refund if your mortgage or loan does not go ahead but the fee paid will cover a second mortgage application if applied for within 6 months of the initial application.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE