Caithness Map :: Links to Site Map Great value Unlimited Broadband from an award winning provider  

 

How To Finance Your Self-build New Home

5th September 2019

Photograph of How To Finance Your Self-build New Home

If you need to raise finance for your project it is usual to seek a ‘self-build mortgage'.

Mortgages for self-build houses are a specialist product and many lenders do not offer them. However, the self-build mortgage market has expanded considerably in recent years and so long as your project is correctly planned and presented, you should have little difficulty in obtaining a mortgage.

The major difference between a self-build mortgage and a traditional mortgage is that with the self-build version you will receive your mortgage funds in several stages, as your house build progresses, rather than a single lump sum, when buying an existing house. Within this overall structure there are a number of variations.

A self-build mortgage may cover the purchase of the building plot (depending on the lender). For the build itself, the mortgage will be paid to you in 4-6 instalments upon completion of agreed stages of the build (e.g. completion of the foundations).

The amount you can borrow for your self-build will vary from lender to lender. Some will only allow you to borrow for the build itself, others will offer a mortgage on both the land and the build. At the time of writing (2019) it is possible to borrow up to 95% of the value of the land and 90% of the value of the completed house from some lenders. But, many will not lend more than 75-80%. If you borrow a high percentage, it is likely you will have to pay a higher interest rate.

If you have difficulty raising the amount required as a self-build mortgage but the lender will grant you a higher percentage on completion the Self-Build Loan Fund may offer a viable solution.

Not everyone wants, or needs a mortgage. You may be able to fund your build in other, cheaper ways. For example, if you already own a house with substantial equity, it may be cheaper to re-mortgage your house with a larger loan and use this to fund your self-build. A re-mortgage on an existing property should always work out cheaper than a self-build mortgage. You may also wish to consider selling your existing property and moving into rented accommodation or a caravan on site.

You'll find information on suitable sources for self-build mortgage facilities on the Thermohaus website.

NB While you are actually constructing your house, you will probably need insurance in order to protect yourself and to meet the requirements of your mortgage lender. In particular, you are looking for insurance to protect yourself against the following claims (if applicable:

>Contractor and third party claims

To protect yourself against claims for injury or death of people working on your site or any other third party.

>Employer's liability insurance

To protect yourself against any claims in your role as a building employer.

>Site and Materials

To protect yourself against loss, theft or damage of building materials and your partially completed house.

>Equipment

To protect yourself against loss, theft or damage to equipment on site.

Most self-builders take out an 'All Risks' policy with a specialist broker. There are a handful of specialist self-build insurance providers and you will find their details HERE

See also

Building Your Own Home Is Easier Than You May Think

Can You Afford to Build Your Own home

 

Related Businesses

 

Related Articles

Can You Afford To Build Your Own Home?Thumbnail for article : Can You Afford To Build Your Own Home?
Before you begin planning your new home it is imperative you set a budget.  And, as your build progresses, you must monitor the spend to ensure you stay within budget.  
Building Your Own Home Is Easier Than You May ThinkThumbnail for article : Building Your Own Home Is Easier Than You May Think
Today we begin a series of articles written by Peter Body of Thermohaus Ltd , a Caithness based timber frame kit home company.   Why Self-Build? For decades the British have bought new homes as standard speculatively built products from national and regional house builders.  
Self-build expert in Caithness launches new eco home conceptThumbnail for article : Self-build expert in Caithness launches new eco home concept
Caithness based chartered surveyor Peter Body has been designing, manufacturing and project managing self-build homes for 35 years.  And, according to him, this experience can be distilled into just two pieces of advice to self-builders - keep it simple and think fabric first.  

[Printer Friendly Version]