Selfbuilder & Homemaker – July – August 2019

(lu) #1

H


ave you ever imagined what your
dream home would look like?
Would you have an open plan
kitchen, a spiral staircase reaching all
floors or even floor to ceiling windows?
While building a dream home is just a
dream for some, for others, it’s a reality.
The self-build trend appears to be
sticking around, as more and more
people choose to take ownership of the
design of their home. Accessibility to
more creative solutions and ideas is
encouraging self-builders to incorporate
aspects they want to have such as a more
environmentally friendly home or unique
construction types.
Circumstance is also encouraging self-
builders out of the oak framed woodwork.
Whether it’s parents gifting land to their
children, people downsizing and building
in their back garden, or first time buyers
taking the plunge to create their dream
home because of a lack of housing
available, circumstance is definitely
supporting this growing area.
When thinking about their dream
home, most people think about the
finished product, the physical bricks and
mortar (or steel frame!) but at what
stage do you need to think about
financing those bricks? Do you know
what type of mortgage you need, or
what advice to get?
A mortgage to help you build a home
is different from a mortgage you may
have had before, such as a residential
mortgage. For a residential mortgage, a
lender would offer you a mortgage for a
house that already has plumbing and
heating – somewhere that you can move
straight into and then make the cosmetic
changes to create your home.

DOING THINGS DIFFERENTLY
With self-build, of course, there is no
house to lend against! It is difficult to
assess the risk as a lender and the

valuation of the property can fluctuate
greatly in comparison with buying a
house the traditional way.
Initially arriving at the potential lending
amount means a different calculation.
Most lenders will require more paperwork
upfront such as outline planning
permission before looking at a mortgage
application. Self-builders will also need to
have a good idea of the costings for the
project, have a warranty provider in mind
and the building plans available before a
formal application can be submitted.
A self-build mortgage is there to help
you stay financially stable throughout the
build, and money is therefore released
differently – in most circumstances, it will
be offered on a staged payment basis –
arrears or advanced (dependent on your
lender). These staged payments are
arranged in accordance with your

costings, so your amounts may differ
throughout the build. For example, you
may need a higher amount earlier in the
process to input your footings, so the
remaining staged payments will be
smaller.
Some lenders will allow you to have
your self-build mortgage on interest-only
terms whilst your house is being built.
This will keep your monthly mortgage
payments as low as possible which in turn
improves your cashflow.

WHERE TO FIND FUNDING
Not all bank and building societies
provide self-build mortgages so it’s
important to know which ones do.
If you already have a mortgage, start
with your existing lender. They may be
able to switch your current mortgage to a
self-build mortgage with minimum costs

Despite the numbers of self-builds growing rapidly, getting the right advice on


mortgages can be tricky. David Lownds of Hanley Economic Building Society


outlines the basics of self-build financing, and gives some tips on how to


manage your build’s budget


Managing your


build’s bottom line


FINANCE & INSURANCE

july/august 2019 http://www.sbhonline.co.uk 47
Free download pdf