Building your own home - dream or reality? Make it your reality through Contractor Financials

In recent years the housing market has been revitalized but in spite of this, demand still outweighs supply. To combat this issue the Government launched a scheme on 21st July 2011, enabling more people to self-build.

Previously self-build homes were seen only as an option for a wealthy minority but increasingly people are realising that this is no longer the case. Self-build contractor mortgages are achievable for all contracting professionals. So if you dismissed building your own home as implausible, due to your contractor status, we can help you realise your dream and make it a reality. Call us today on 0333 370 8888 and we will guide you through the process.

A self-build mortgage, how does it work?

  • You will need to find a 35% deposit
  • Your chosen lender will lend you 65% of the property or plot value
  • Your contract rate, on its own, is enough to get you a self-build contractor mortgage.
  • An average self-build project has 70% of the mortgage still outstanding when the build is complete. When you get to this stage of completion, to obtain the best mortgage rates available, you have two options, you can either re-negotiate with your current lender, or remortgage to another bank or building society.
  • Self-build mortgages are available in varying forms and apply to not only “ground up” builds, but also commercial properties, uninhabitable buildings and properties that could be turned into residential homes.

How is a self-build mortgage different?

The principal difference between a self-build mortgage and a standard residential mortgage is that the funds are drip fed to you, at key stages of the build, rather than in one lump sum.

The majority of lenders will issue an initial sum to help with the purchase of the building plot, this is usually around 65% of the purchase price then the remaining at main milestones of the build. You will only pay interest on the total amount borrowed.

When does the mortgage lender issue the money?

Most lenders will offer funds when you reach the following key building stages:

  1. Foundations and groundwork for the new property complete
  2. Walls/brickwork finished
  3. Roof on
  4. Wind and watertight
  5. First fix – cabling and pipes, internal walls, ceilings and plastering
  6. Second fix – fixtures and fittings, bathroom and kitchens in
  7. Completion

It is vital that you think about how much cash you’ll need to fund the project between each of the above stages as the funds won’t be released until each key stage has been met.

Between each stage of the build, the mortgage lender will send a surveyor to visit the property to ensure the build has been finished to a decent standard. The surveyor’s fees will be included in your mortgage offer.

Before starting your self-build

It is vital to consider the following factors before committing to a self-build:

Decide if the project is financially feasible

The land and build cost shouldn't be more than 70% of the final cost of the build.

Obtain planning permission

There are two stages:

Outlined consent – local planning authority have agreed to the construction of the property on your site, but have not agreed to the specifics of the property.

Detailed consent – the specifics of the build have been agreed and you are bound to this agreement, although you can apply to change.

Lenders will require the plot to have outlined consent before they release funds to secure the land but will not give any further funds until detailed consent is given.

Plan and get the right professionals for the job

It is vital that you call upon the expertise of the right architects, quantity surveyors or project managers to ensure standards and deadlines are being met. You want to make sure you don’t run over budget due to delays.

Have contracts in place and communicate

We recommend using a Joint Contract Tribunal (JCT) approved contract to ensure all parties fully understand their obligations. It is vital to communicate to ensure there are no misunderstandings which can lead to construction disputes.
The plans can often change part way through the project, so make sure there are plans in place for the latest date changes and amendments can be made so you don’t incur penalties.