17 Jun Funding the build of your own home
When deciding to embark on building your own home one of the first things you will need to consider is funding, how will you fund your project and when will you need the funds.
There are numerous ways to secure the funds you need and it may not be as out of reach as you may at first think. Most commonly people use existing savings, sell a current home (or borrow against it with a secured loan), or borrow the funds by taking out a specialist mortgage.
If you are thinking of embarking on a self-build project, we have the expert advice on hand to help you make the right decisions, give us a call on 01753 392 410 or email us.
One of the first things you will need to do is assess your own situation and set a budget. You may be able to borrow money to supplement your savings or sell an existing property and save by staying with family or friends or in a temporary home (such as a caravan on site or in a rental property). If neither of these are an option for you, various specialist mortgages may be available to you (self-build, custom-build, or help-to-build). These are very similar to a general mortgage; however, payments coincide with the various stages of your build where the funds are released linked to, before or after, the cost of various stages of the work.
One of the benefits of a specialist mortgage and building your own home is that you aren’t required to pay stamp duty (on the building costs or on the property value once it is complete) nor any VAT on the construction costs.
You should ideally aim to have a deposit of around 25% or more of the total project value, if you are unable to fund the whole project outright. However, there are some mortgage lenders that say they can lend up to 90% of the land and build costs; if you already own the land they can lend up to 100% of the build cost – both of these depend on your personal circumstances. You may also qualify for support from Government schemes.
Applying for a specialist mortgage
It is possible to access suitable mortgages directly with a bank or building society, many who decide to build their own home prefer to go through a specialist mortgage broker.
The application process for specialist mortgages such as self-build, custom-build and help-to-build mortgages, can take a bit longer than a traditional mortgage so this may be something to have in mind for timings. In addition to the usual affordability criteria, any lender will also want to see a detailed plan for the build, cost projections and planning permissions, this is something we here at Chaucer Homes can help you with.
Your budget should be at a maximum equal to the average property price per square metre multiplied by the square meterage of your prospective build, minus the price of the land to avoid the build entering negative equity.
Remember to take other financial commitments into account to make sure self-building is a viable option for you. These could be commitments such as an existing mortgage or paying for rented accommodation. Mortgage lenders will take this into consideration in your affordability.
Building your own home is an enormous project to take on, from the offset we are here to help you take the right path, to help make your dreams a reality.
Get in Touch
If you would like learn more about how we can help you to build your dream home, please contact us on 01753 392 410 or email us. You can also find us on Facebook, Twitter, Instagram and LinkedIn – we would love to hear from you.