ThinkIFA guide to the ‘Self Build Mortgage’
If you are thinking of building your own home, converting a building or undertaking a complete renovation on your property then you will need to weave your way through the tangle of paperwork involved in self build mortgages.
What is a Self Build Mortgage?
The difference between a self build mortgage and that of an ordinary house purchase is that your money will usually be released to you in stages as the house build or renovation progresses. This is to reduce the risk to the lender and ensure that the money is spent as planned so that you don’t run out before completion.
The typical amount you can borrow will vary between lenders and will usually be a percentage of either the land, the building costs or both. As a general rule the first sum is paid out once the land is purchased, then usually once foundations are completed the house shell is put up and the interior is finished. The final payment is made upon full completion of the property with an independent valuation.
Rates and Costs of Self Build Mortgages
Dependent on the lender and your circumstances, some mortgages only pay out money at the completion of each stage. However, some lenders will allow the money to be released at the start instead, which can be useful if you don’t have the money up front to pay for each stage.
Interest rates on self build mortgages can be higher than on other mortgages, so it pays to do your research and compare. There is no stamp duty to pay on self build mortgages, saving you potentially thousands of pounds. You only have to pay stamp duty on the purchase of land if the cost was over £125,000.
However there is a lot of paperwork and complicated terms and conditions involved so seeking independent financial advice should be considered.
What should I do now?
If you would like a friendly chat with an independent financial adviser then please complete the enquiry form below.