Many of us have wondered whether it is possible to build our own home.
Whether you’re looking to build a dream home for you and your family from scratch, work on converting a property or if you plan to build a new property to sell on once completed- understanding the type of finance you’ll need is vital.
Self-build mortgages work a little differently to a traditional residential mortgage. For a self-build mortgage, the loan is released in stages as the build progresses rather than in one large payment.
Most lenders will lend a maximum of 75-80% of the total land and build costs subject to an affordability assessment.
Self-build interest rates are higher than an average residential mortgage as they are more specialist and lenders class them as higher risk products. Some lenders will allow you to transfer on to a normal residential rate once the build has completed which can save you a lot in monthly interest payments if your project is completed relatively quickly.
When budgeting for a self-build project, it’s good to get an idea of the costs from a suitably qualified architect. We also like to remind clients that it’s useful to build in a contingency into their expected build costs for any unexpected costs which may arise- around 10% of the total build costs is normally appropriate.
Another thing to consider when you’re looking at embarking on a self-build project is the cost of insurance. You will need site insurance to make sure the plot is properly insured when the property is being built. You will also need to budget for indemnity insurance for when the property is completed – most lenders expect this to be in place for at least 10 years after completions.
Building your own home can be hard work and stressful- that’s why you should take guidance on the process from an experienced financial advisor with good knowledge of the self-build market. Get in touch if you’d like to chat about the process.