Self Build Mortgages

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

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.

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 .....

Stages of a Build The stages of a build depend on whether or not you are building a traditional (brick and block house), a timber frame construction or if you are renovating or converting an existing property. The following table gives an indication of the typical stages for each:

Accelerator Self Build Home Mortgage Features and Benefits

You can borrow up to 95% of land costs, up to 95% of build costs and up to 95% of the end value of your new home.

The borrowing percentages on self build home mortgages will vary from lender to lender and some will offer percentages as low as 75%. With the Accelerator Self Build Mortgage, the borrowing percentages are generous at 95%. You can borrow up to 95% of the cost of your building plot or renovation, so, even with a relatively small deposit, you can make sure that your project gets off the ground. You can also borrow up to 95% of the cost of each stage of your build and this is not subject to any interim valuations.

Your stage payments are paid at the start of each build stage so you enjoy positive cash flow right through your build.
With the Accelerator Self Build Home Mortgage, you receive your stage payments at the start of each build stage. This gives you ‘cash in hand’ right through your build, allowing you to leverage cash purchasing power when you are buying building materials, for example. Having positive cash flow is perhaps the greatest enabling factor for self builders – without it, many simply would not be able to find sufficient cash to fund the build.

You can stay in your current house as you build your new home
The Accelerator Self Build Home Mortgage is designed to run alongside your existing mortgage as you build. And because there is no need to sell your current house to release the equity it contains to fund the build, you can simply remain there until you are ready to move. No costly furniture storage, no caravan on site – Accelerator is flexible and convenient.

You can choose from a range of mortgages and interest rates
The Accelerator Self Build Home Mortgage is supported by a panel of leading lenders. These lenders are happy to direct their self build customers to the Accelerator Self Build Home Mortgage scheme and some have even offered better mortgages to Accelerator customers than would be available through their branch network!

When you apply for the Accelerator Self Build Home Mortgage, your personal circumstances will be taken into consideration and you will receive a recommendation for the mortgage type, repayment method and interest rate which best suits.

You can purchase your land with Outline Planning Permission
Being in a position to put in an offer on a potential building plot when it becomes available is a huge advantage for self builders. With the Accelerator Self Build Home Mortgage, you can purchase land with only Outline Planning Permission, so you are free to move quickly if such a plot becomes available. Some lenders will only lend on Detailed Planning Permission, which can take months to be arranged, and would also assume that you could provide a detailed specification for the house.

If you are self employed, Accelerator offers a self certification mortgage
Many self builders who approach us are self employed and are delighted to hear that there is a self certification option with the Accelerator Self Build Mortgage. The self certification mortgage, enjoys all the usual benefits – high lending percentages and no need to sell your current house until you are ready to move.

Releasing money in advance
To enable money to be released in advance and provide a positive cash flow, the Self Build Home Mortgage has a unique additional cash flow benefit scheme. This provides the additional security required by the lender to allow them to release money at the start of each stage of the build. The scheme ensures that you can borrow the amounts you need for each stage when you need them as the funds will be released as per the cost of your building work and will not be subject to a mortgage valuation figure.

The cost is met by the borrower by paying the Additional Cashflow Benefit Fee but the savings made by not needing interim valuations at each stage of the build and the benefits of the positive cash flow provided mean that the overall cost of the project will be lower. In addition because you are not waiting for valuations to be carried out before each stage payment is released, money is released more quickly, speeding up the completion of the project.

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