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We’re working with Mortgage Advice Bureau to help you find the best mortgage deal by comparing 1000’s of mortgages from over 90 different lenders.
More people choose to create and construct their dream homes these days so self-build and renovation mortgages are becoming increasingly popular.
You don’t need to have a background in building or construction. Just the persistence, passion and finances to see your project through… and a dash of good luck!
How do self-build mortgages work?
With a self-build mortgage, funds are generally released in stages as the project progresses, rather than in a lump sum. As a guide, these stages tend to fall into six benchmarks:
- Purchasing the land
- Initial project costs and laying foundations
- Construction to wall plate levels (and timber frame erected if appropriate)
- Building made wind and watertight
- First fix and plastering
- Second fix through to finish of the build.
Releasing funds in stages helps make sure you don’t run out of money halfway through the project!
Key features to look for with a self build mortgage:
Not all self build mortgages are the same, so it’s important to consider your needs for your project. For example:
- Are you able to borrow to pay for the land?
- Do you need stage payments in advance?
- Are there any incentives for investment in energy efficient features?
- Do you need the mortgage on an interest only basis during the build?
- Can you transfer to a standard mortgage at the end of the build without incurring early repayment charges?
Top tips for self-builders
Always work with a contingency fund – at least 10% of your overall budget.
Choose a lender with experience of this type of specialist lending and who offers a personal service.
Be clear about your expectations. You might be building your forever home or creating something to sell in the future for profit. Remember you can reclaim VAT on much of your materials, giving you 20% back on allowable costs.
Choosing to self-build can often result in a house that’s substantially cheaper than an existing property. To start with, stamp duty should be low as tax is due only on the cost of the land – not the value of a completed house.
If you’re looking to renovate instead, you can benefit from the same stamp duty and VAT incentives.
If you’re interested in finding out more about mortgages for Self Build and Renovation MAB's mortgage advisors can help you. Simply call 01664 494100 or visit our Mortgage Advice Bureau website.
Guide to Self Build
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