Self Build Mortgage

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March 9, 2020

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What is a Self Build Mortgage?

Not everyone can find their dream home on the market – even after months of searching. This is where a Self Build Mortgage could become an option for these clients.

A Self Build mortgage is designed to help your build your own home and with this type of mortgage the funds are released in stages. These funds can be released in Arrears – where the stage payments are given as each stage of the buil has completed, or in Advance – the stage payments are released at the start of each stage.

Some Self Build lenders will lend on the purchase price of the plot as well as the build costs, not all lenders do however and you would still need to contribute some of your own funds. The Loan to Values of a self build mortgage varies from lender to lender but you’re looking at between 75-90% of the purchase price and 80-90% of the build costs.

When thinking about a Self Build mortgage you also need to consider that the interest rates on are typically higher than a standard mortgage – but once the property has become habitable it is easy to switch to a lower rate of interest.

These mortgage are regulated by the Financial Conduct Authority and therefore these lenders will calculate the amount they can lend you depending on your income and outgoings, just the same way as a standard mortgage.

A couple of points to consider when thinking about whether a Self Build mortgage is right for you:

  • Where are you going to live during the works – if you intent to rent or you currently own a mortgage, these monthly payments will affect how much you can borrow
  • What materials/build systems do you plan to use – some lenders restrict what type of construction methods or materials they allow
  • Estimated build costs
  • Supporting documents that the lender will require for example planning permission, construction drawings, Building Regulations approval etc

There are a number of lenders out there who can help with a Self Build mortgage and if you would be interested get in touch today.

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