Selfbuilder & Homemaker – July – August 2019

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