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30 Apr 2017

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Self Build Mortgages Explained

Self Build Mortgage

Self Build Mortgage products are now a viable option for those wanting a low-cost home and willing to put in some hard work.

According to self build advice company Buildstore, the numbers of people doing self build themselves are remaining steady but TV programme's such as Channel 4’s Grand Designs, coupled with high house prices, are fuelling interest. But many people are still put off by the perceived amount of capital required, the time it can take and a lack of experience.

Why Do Self Build?

Self-build can offer many benefits over a traditional house purchase, such as typically being worth 30 per cent more on completion than it cost to build. Another important factor is individuality; self build customers can make their properties unique and can customise their homes to match their own specific needs.

The most important function of the self-build scheme is to oversee and manage the project from start to finish, rather than actually doing the building themselves. These days there is a lot of help available from companies such as Buildstore which offers advice on everything from finding land and buying materials to finding a self build mortgage and appointing a project manager.

Buildstore spokesman John Hay says: “Self-builders usually get a project manager or architect and get them to manage the build. Their fees are usually based on a percentage of the costs. Project managers offer varying levels of involvement from just negotiating contracts and getting quotes, to overseeing each stage through to completion. Essentially the more you spend on a project manager, the quicker the job will get done.”

For those wishing to manage the project themselves, be warned that it is not as easy as it looks. Linda Will is managing director of Accord Mortgages, which offers loans in conjunction with Buildstore. She says: “The biggest mistake is people not treating it as the project it really deserves to be, and it’s a more difficult project if they don’t have any of the skills themselves. You might need 20 different tradesmen in the right order at the right time, and it’s when time scales slip that’s costs go up.”

How do Self Build Mortgages Work?

In the past the only types of mortgage on offer were arrears staged-payment self build mortgages, which meant a stage had to be finished before funds were released and customers needed to be cash rich at the beginning to get the build under way.

But, together with lenders such as Norwich & Peterborough, Accord Mortgages, Skipton Building Society and Nationwide, Buildstore now offers advance staged-payment self-build mortgages called the Accelerator mortgages.

Accelerator Self Build Mortgage

With the accelerator self build mortgage funds are released prior to the start of each stage and customers can borrow up to 95 per cent of the land costs and up to 95 per cent of the construction costs.

Key Benefits of t he Accelerator Mortgage

  • Money released in advance of each stage
  • Up to 95% of land costs
  • Up to 95% of construction costs
  • Up to 95% of the final value of your home
  • Competitive rates of interest
  • Ability to stay in your home until your new one is complete

Stages For Self Build and Renovation Mortgages

Stage

Brick & Block

Timber Frame

Renovation/Conversion

1

Purchase of land

Purchase of land

Purchase of the property

2

Preliminary costs & foundations

Preliminary costs & foundations

Preliminary costs and structural overhaul

3

Wall plate level

Timber frame kit erected

Wind & watertight

4

Wind & watertight

Wind & watertight

Plastering & services

5

First fix & plastering

First fix & plastering

Second fix

6

Second fix to completion

Second fix to completion

To completion

John Hay says: “Stages are logical break-points in the project, such as the foundations being finished, or the property being treated to protect against wind and water. The last stage is to complete the house and fit the bathrooms and kitchens.”

Skipton customers can choose any product from its mortgage range and take it on an Accelerator basis. It also offers a three-year finance deal, called the Advance product, for borrowers who want to stay in their existing home while they build, but who will not require a mortgage once they have sold it off.

Meanwhile Accord Mortgages offers the only offset Accelerator mortgage, which benefits people who have sold a property to fund the build and have cash reserves that can be offset against what they owe.

Gone are the days when people self building their own home lived on-site in a caravan. Hay says: “Self build mortgage products are designed to allow you to remain in your current house and keep the mortgage running while you’re building. But the existing mortgage is treated as an expense and reduces the maximum you can borrow. Another option is to sell up and rent accommodation while building.”

A good plan with full costings is essential to any self-build project, as are organisational skills and knowledge of local suppliers. A contingency fund is vital, as most projects cost more than anticipated.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

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Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600

We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £500

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