The Two Types of Self Build Mortgages
Until the last few years, self-build mortgage staged payments were always made after each stage had been completed, reducing the risk for the lender.
This has all changed recently, and there are now two basic types of self-build mortgages:
• Traditional – stage payments made in arrears
• Advance – stage payments made in advance of each stage
Advance self-build mortgages have the same stages as traditional self-build mortgages, but each stage payment is made at the beginning of the stage, rather than the end.
This is great news for self builders, as it reduces the amount of cash you need to have available to fund your build.
Can I Get A Mortgage To Buy The Land?
Some lenders will contribute a percentage of the cost of your land; some insist that you purchase the land outright and that they will only fund the building of the house itself.
Talk to your mortgage adviser about all of this beforehand, so you know what to expect and how far your budget will stretch.
An independent mortgage broker should be able to find you a land + build deal if this is what you need.
What Do I Need To Provide To Get A Self-Build Mortgage?
As with any mortgage, you will need to provide proof of income, undergo a credit check and confirm your identity.
Self-certified self-build mortgages are available for self-employed people, so not being able to prove your income is not a major problem.
There are also some other requirements relating to the property you are planning. A basic minimum for a mortgage offer is usually:
• The plot of land should have at least 1-2 years outline planning permission in place
• Architect’s drawings and full costings for your planned home
• Building regulations approval
• Contractor’s All Risk Insurance – to cover you for any damage to the property while it is being built
• A 10-year structural guarantee for when the property is finished
How Do I Get A Self-Build Mortgage?
Although self-build mortgages are well within the reach of most people, there is quite a lot of variation in the facilities they provide:
• Loan value
• Land included or excluded from loan
• Stage payments in advance or arrears
• Present mortgage ignored or included in affordability checks
To make sure you get the best self-build mortgage for your circumstances, we would strongly recommend using an independent mortgage broker specialising in self-build mortgages.
They will have access to the whole self-build mortgage marketplace, and will be able to compare and contrast different mortgages to find the one that suits your finances and your needs the best. This is extremely difficult to do yourself, and using a broker will save you a lot of time and improve your chances of finding the best deal.