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Mortgage
Self Build Mortgages UK | Self Build Loan
Most people decide on a self build home for one or more of the following reasons:
- To create their own home.
- To get more for their money - for most self builders this is the prime motivation with a typical self build being valued at 25% - 30% more than the cost of the land and build costs.
- To build in a location of their choice
- To have a greater input into the design and materials used - both the exterior and interior can be designed to suit requirements. Room sizes can be increased, dimensions altered or layouts varied.
- To build a house to suit their lifestyle - with a growing family a self builder may include extra bathrooms, a study or even a basement playroom whereas a self builder whose family has left home may decide to have larger public rooms and fewer bedrooms.
- Value for money by self building
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There are three reasons why self build home projects result in a house being worth more than it costs to build:
No developer's profit - self building means that there is no property developer involved and the profit that they would take on the new home is avoided.
Less stamp duty to pay - on a self build project, stamp duty is only paid on the land and then only when the purchase price is over £60,000.
There is no stamp duty payable on the cost of the build and this can result in a substantial saving to the self builder.
VAT can be reclaimed - this is done at the end of a build and is a big advantage of building a new house rather than extending or renovating your existing one. VAT can be reclaimed on goods and materials bought from a VAT registered supplier which are incorporated into the building or the site. Also when using a VAT registered contractor, all invoices for labour and material should be zero rated.
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The main difference between a self
build home mortgage and a house purchase mortgage is: With a self build home mortgage money is released in stages as the build progresses rather than as a single amount. Some lenders will lend you money to purchase land, typically 75% of the purchase price or value, whichever is lowest. After this, the money for the build is released in a series of stages. These can be fixed or flexible depending on the lender but usually there are five. |
During the build you can borrow typically 75% of the cost of the value of the house as the project progresses, depending on the chosen lender. There are two methods by which the money can be released during the build – at the end of each stage or at the start of each stage. (Known as arrears stage payments and advance stage payments respectively.)
In the arrears stage payment method, the money for
that stage is released after the stage has been completed and a valuer
has visited the site. This can cause some self builders to have cash
flow difficulties.
The advance stage payment method is a more recent development.
With it the money required for that stage is released at the start
of the stage before work starts. This advance payment mortgage has
become very popular as it gives positive cash flow during the build,
and the high percentage lending of 95% of the cost of the build through
the Self Build Home Mortgage, makes it is easier to stay in your
current house while the build progresses.
Self Build Mortgages .....