Last Updated on: 22nd November 2023, 02:17 pm
When many people think of self-build projects, they dream of an elaborate, Grand Designs-style venture that’s as audacious as it is costly.
While this may well be the case in some instances, it’s important to remember that plenty of people undertake their own, much smaller projects also – and financing the plan can be one of the biggest challenges either way.
Here at esbs, we recognise that every single project is unique, and as such, we treat each case on its individual merits. It’s important to us that the mortgage journey of our members goes as smoothly as possible so that we can help turn their dream into a reality.
Therefore, we’ve put together the following list of top tips to help guide people through the process of applying for a self-build mortgage with us.
The advantages of building your own home
There are a number of advantages to taking out a self-build mortgage when building your own home.
These include the prospect of saving thousands on the cost of Stamp Duty, seeing as this doesn’t need to be paid against the cost of the building work, nor the property’s value once the work is finished. You are only required to pay Stamp Duty on the cost of the land itself if this exceeds £125,000.
Self-build projects can also bring financial gains with them as people might find that their completed property is more valuable than the cost of construction, and often it’s the case that this is cheaper than buying a home.
Make sure your project meets the criteria
To be able to provide a self-build mortgage, we do require that the project qualifies against a number of points.
Firstly, the property needs to be detached and for your own, residential use as we cannot lend on buildings that will be used for commercial purposes, which includes letting out to tenants.
For the main part, the property must also be built with conventional construction materials, though our advisors are on hand to help with any questions you might have about this.
The property needs to have a suitable warranty or have supervision from an architect or professional consultant. A full list of acceptable warranties and architectural qualifications is available on our website.
In addition to covering part of the cost of land purchases, we can also consider lending for property renovations and barn conversions.
A self-build project where planning permission is in place and is subject to an agricultural tie clause or a Section 106 occupancy clause may also be eligible.
Budgeting and cashflow are key
When applying for a self-build mortgage with us, we will need to know how much you anticipate the project is going to cost. You will also need to make sure that you are able to afford somewhere to live in the meantime.
We can consider lending up to 50% of the value of the land, and we permit borrowing against the land if it already belongs to you, while you can borrow up to 75% of the value as the works progress. We normally lend in stages during the project.
What’s more, it is probable for your monthly mortgage payments to be interest only, if required, until completion of the works and you move in.
In all instances, you will need to access savings in order to part fund the project, so it’s important to ensure that they are not locked up.
Have all the essential paperwork ready
Having all the appropriate documentation ready is an absolute must when applying for any mortgage, but especially a self-build one.
These include a site map showing where the property will be built, floorplans detailing the size and layout of the building, a rundown of the associated costs as well as valid planning permission.
The process can take some time to complete, so you will need to be clear about everything, including the people and materials being used, for it to go as smoothly and quickly as possible. We will work with you throughout the enquiry, application and build phases – we are here to help you.
Make an overall assessment
During the build itself, you will also need to have appropriate construction insurance, with full property insurance established upon completion and occupation.
As building works can go on for 12 months or longer, it’s important to take stock of the situation by also speaking to us about your mortgage once the work is completed to see how we can rearrange your mortgage.
To find out more about applying for a self-build mortgage with us, visit www.esbs.co.uk/self-build-mortgages.
