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A self-build project is essentially done in one of two ways. The first way is the do-it-yourself route, where you manage the build and most of the work is done by yourself and you employ skilled tradesmen where necessary, such as plumbers and electricians etc. Alternatively, you can engage a project manager, surveyor, and architect etc. to do the work for you.
Regardless of which approach you choose a standard residential mortgage will not be able to fund the project. Alternatively, you will require funding with a self-build mortgage, and an experienced broker can be a valuable asset when arranging this type of mortgage.
A self-build mortgage is a loan taken out to fund the cost of building a new home for yourself to live in. This type of mortgage differs from a standard residential mortgage because you receive the funds in stages as you complete pre-agreed parts of the build rather than receiving one lump sum payment. This reduces the risk to the lender, ensuring that the funds are spent as intended, and you do not run out of funds part way through the project.
The staged payments can vary, depending on the nature of the build and the lender providing the funds. Typically, the first payment will be made when you purchase the land (if you don’t already own it). The second payment is made when the foundations are laid, and then a further payment provided when the build is eaves level.
Further stage payments are usually made when the roof is watertight, and when the interior walls are plastered, with the final stage payment being made on completion.
A big advantage of a self-build mortgage is the potential saving you will make on stamp duty.
This saving is due to the fact that stamp duty is not levied on the cost of the building work or the value of the completed property. You will only be required to pay stamp duty on the value of the land, and then only provided the land cost is greater than £125,000. Those who do self-builds often benefit from the final value of the completed property being much greater than the cost of the land, materials, and labour combined.
There are generally two types of self-build mortgage, as follows:
Paid in arrears: This is by far the more common type of self-build mortgage, where payments are made after each stage of the project is finished. This type is better for those self-builders that have cash reserves at hand.
Paid in advance: With this type, payments are made at the beginning of each stage, ensuring that funds are available to pay bills for materials and labour when they are due. This type aids cash flow and is more suitable for people who have less funds of their own available.
It is important to be prepared when approaching a self-build project, and have all the necessary information ready …
Compared to a normal residential mortgage a self-build mortgage commonly involves more paperwork which will include detailed plans of the property. Further to this a projection of all the projects costs will be required at the outset, which will usually be accompanied by a schedule of works outlining the proposed time frame for your build.
In most cases evidence of planning permission having been granted will also be required. Depending on the detail of the project you will usually be required to provide a deposit of at least 25% of the overall project value.
Supporting documentation you will need to provide usually includes:
Project costings & schedule of works
Planning permission documentation
Architects drawings and specifications
Building regulations approval
Site insurance and structural warranty documents
Confirmation of architect’s professional indemnity insurance
Most people will pay the self-build mortgage off with a standard residential mortgage when the project is complete, and you will also be required to evidence that you can obtain this.
A self-build mortgage is a loan taken out to fund the cost of building a new home for yourself to live in. This type of mortgage differs from a standard residential mortgage because you receive the funds in stages as you complete pre-agreed parts of the build rather than receiving one lump sum payment. This reduces the risk to the lender, ensuring that the funds are spent as intended, and you do not run out of funds part way through the project.
The staged payments can vary, depending on the nature of the build and the lender providing the funds. Typically, the first payment will be made when you purchase the land (if you don’t already own it). The second payment is made when the foundations are laid, and then a further payment provided when the build is eaves level.
Further stage payments are usually made when the roof is watertight, and when the interior walls are plastered, with the final stage payment being made on completion.
A big advantage of a self-build mortgage is the potential saving you will make on stamp duty.
This saving is due to the fact that stamp duty is not levied on the cost of the building work or the value of the completed property. You will only be required to pay stamp duty on the value of the land, and then only provided the land cost is greater than £125,000. Those who do self-builds often benefit from the final value of the completed property being much greater than the cost of the land, materials, and labour combined.
There are generally two types of self-build mortgage, as follows:
Paid in arrears: This is by far the more common type of self-build mortgage, where payments are made after each stage of the project is finished. This type is better for those self-builders that have cash reserves at hand.
Paid in advance: With this type, payments are made at the beginning of each stage, ensuring that funds are available to pay bills for materials and labour when they are due. This type aids cash flow and is more suitable for people who have less funds of their own available.
It is important to be prepared when approaching a self-build project, and have all the necessary information ready …
Compared to a normal residential mortgage a self-build mortgage commonly involves more paperwork which will include detailed plans of the property. Further to this a projection of all the projects costs will be required at the outset, which will usually be accompanied by a schedule of works outlining the proposed time frame for your build.
In most cases evidence of planning permission having been granted will also be required. Depending on the detail of the project you will usually be required to provide a deposit of at least 25% of the overall project value.
Supporting documentation you will need to provide usually includes:
Project costings & schedule of works
Planning permission documentation
Architects drawings and specifications
Building regulations approval
Site insurance and structural warranty documents
Confirmation of architect’s professional indemnity insurance
Most people will pay the self-build mortgage off with a standard residential mortgage when the project is complete, and you will also be required to evidence that you can obtain this.
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