What are Self-Build Mortgages?
Self-build mortgages do exactly what they say on the can: give you the money you need in order to finance your own self build project. With rising house prices, self-build mortgages are often the only way to get a foot on the property ladder; they are also a great way to get an awful lot of house and features for your money.Self-build mortgages are provided by all the traditional types of mortgage lenders.
The money is released in installments in order to give you the money to complete the different stages of building your house. Also, there will be an initial release of money in order to allow you to purchase the land initially needed to site your self-build home.
Before you sign on the dotted line for one of these self-build mortgages you need to check with your mortgage lender when these installments will be paid to you. You need to make sure that you sort out this cash flow if you want to have a successful self-build project.
The amount of money available through self-build mortgages depends on your finances and ability to repay the money and it also varies between mortgage lenders. However, for the vast majority of self-build mortgages, expect to only be able to borrow up to seventy-five per cent of the cost of the land and approximately sixty percent of the building costs, so you will still have to find a sizeable down payment yourself, as with any mortgages.
One thing you need to bear in mind is that there is a misnomer in the name ‘self-build mortgages’; many mortgage lenders will not let you borrow money from them if you intend to build the house yourself, rather than having it professionally built. That makes sense because if you default on your mortgage the lenders can repossess your house and they need to know it is a soundly built property which they can sell in order to recoup their money.
When calculating what self-build mortgage and down payment you will need, bear in mind that there are a few hidden costs in building your own property, like planning permission and legal fees. You will also need to pay fees if you need professional architects and builders of course, if you need them to secure your self-build mortgage and get your property built. If you allow for your self-build house to cost you approximately ten per cent more than you initially estimate, that should allow you to stay in budget and avoid any nasty shocks.
You should also consider buying insurance on your self-build project; that should cover you in cases of your builders or others delaying or over-spending, so it is protection well worth adding to your self-build mortgages. You can easily add insurance policies to self-build mortgages through insurance brokers.
So, self-build mortgages may not be as cheap as you hoped, but they are definitely a cheaper option for getting a house built to your specifications, Self-build mortgages bring the possibility of a dream home to many more people.
Please read some of our other interesting articles on mortgages below:
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