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There are many advantages to doing this. You’ll get a property built to your exact tastes, and it usually works out cheaper than buying a similarly sized new-build property.
However, self build mortgages work slightly differently to traditional mortgages. You’ll typically receive funding at various stages of the build, rather than in one lump sum. In many cases, you’ll need a bigger deposit to be eligible for these products. You can often expect to pay a higher interest rate too.
With self build mortgages, you’ll typically receive the money required to fund each of the following stages.
With an arrears mortgage, you’ll have to fund each of these stages yourself, before claiming back the costs from your mortgage provider. It’s imperative to provide proof of the costs of labour and materials. It’s common that you’ll be offered better terms on this type of mortgage.
Some lenders also offer advance mortgages, where the funds for each stage are delivered before construction starts. You’ll still need to provide proof of how the money was spent.
Not all mortgage lenders offer funding for self build projects. The best way to find a lender willing to work with you is by using a professional mortgage adviser. These individuals have the knowledge to be able to recommend the lenders most likely to approve you, depending on your financial circumstances.
Most self build mortgages come with introductory deals to tempt customers. They are most commonly available as discount or fixed-rate deals, which switch to the lender’s standard variable rate after a set number of years.
You can expect to have to stump up a bigger deposit compared to traditional mortgages. Often, lenders will set different deposit limits for the land purchase and building costs. For example, they’ll demand a minimum 25% deposit for the land and 15% deposit for the materials and labour.
The interest rates on self build mortgages tend to be higher than traditional mortgages, but it is possible to remortgage to a more competitive deal once the building is completed.
There is a lot of supporting documentation needed to apply for a self build mortgage. Keep in mind that this is intended to give your mortgage provider a strong enough sense of how the project will proceed, confidence that their money is in safe hands and that it will be repaid without any problem.
Supporting documentation typically includes:
If you budget correctly, your finished home could be worth around 20% more than its combined land and build cost, but this requires a lot of know-how.
For this, you’ll need to employ the help of experts in the field, who can guide you into making the right choices, which will inevitably up the cost.
You’ll also be able to choose your own design, fixtures and fittings, which gives you great flexibility if you are looking to make the property more cost-efficient, for example.
In truth, there is no simple formula to work out the cost to build a house, but there are many variables to consider when estimating.
Location makes a difference – it’s more expensive in London and the South to build a house than it is up North.
You’ll need your own land to build a house on, which means buying a plot. Plots are usually valued by estate agents, who calculate how much a finished house would cost on that particular plot, and then subtract the estimated cost of building from scratch.
Building most of your new home yourself can save you around 30-40% on the total price, employing help as and when you need it. You will also need to buy all materials yourself, directly from the merchant. The quality of these materials is an important thing to think about when it comes to cost. The more luxurious the items you choose, the more it’s going to set you back.
Buying land and getting the permission to build your own home doesn’t come without it’s own set of extra legal and planning costs. With legal fees, Stamp Duty, Land Tax, surveys and design fees, there are a lot of overheads to take into account. To ensure there are no surprises, make sure you plan and calculate correctly.
Factors such as the complexity of the project, the land on which the home is being built, the location and the intricacy of the home’s floor plan can affect the building timeline.
Custom homes can also take longer to complete than production homes, while manufactured homes are typically completed in a few months.
Self building can be a great opportunity to create a totally bespoke custom home that’s uniquely designed to suit your needs. The following steps will take you through that process.
Tracking down the right site for your project can seem like a headache, but don’t panic – there are plenty of online resources to help, although word of mouth is often the most powerful tool.
One of the first things you need to have in place on a self build project is funding – and having the finance available right from the start could be crucial in sealing the deal on a plot.
Dedicated self build mortgage products are now widely available through brokers. These work on a stage payment basis, which means funds are released at key points throughout your project – either in advance or in arrears, depending on the product you choose.
It’s rare for a self build to turn into a money pit, despite what you may see on TV shows like Grand Designs. This is because the majority of self-builders take a sensible approach to budgeting, setting a firm and realistic figure for the project before the design stages begin.
Remember to always include a contingency – at least 10% of your overall budget. This money should only be used for unexpected costs during the project, such as additional foundation requirements or unavoidable delays. If you still have the contingency at the end of the build, use it to upgrade interior finishes.
Whether it’s a package supplier, an architect or another form of house designer, be sure to choose someone to design your new home who understands your requirements and is able to produce thoughtful responses that fit with your budget.
Speak with the planners as soon as you can to figure out whether your project is viable. Most local authority departments offer pre-application advice, which can help you get a strong idea of what your planning officer will and won’t accept in terms of style, size and any materials.
This comes down to who you want to help you build your new home.
Are you going to opt for a package company to guide you through the design and build process? These companies are usually better for first-time self-builders and offer customisable standard houses, as well as a bespoke design option.
Others may prefer to use an architect and main contractor or professional project manager. This is because many like to project manage the build themselves, saving money by keeping a close eye on everything.
Whatever you decide, don’t be afraid to take the lead at times, especially if you have strong views on particular build methods or materials.
Before starting a project, it’s crucial that you have appropriate consents to build, including planning permission, building control approval and any other specific permissions such as listed building consent.
It’s also a good idea to make sure you’ve safeguarded your investment by getting the right contracts, warranties and insurance in place at this stage.
Before you can do anything else, you’ll need to prepare your site for the building work, from clearing vegetation to levelling the plot and setting out the trenches. Your main contractor should be able to deal with this stage, as well as any drainage needed.
Most self builders choose between two construction methods for their project. Brick and block is the traditional and most common, while timber frame is great for quick, predictable construction schedules.
Other methods are available, including structural insulated panels and insulating concrete formwork, so make sure to do your research to find out whether these might better suit your project.
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