BuildStore’s Finance Expert, Rachel Pyne explains the key things to consider when funding your self-build
Having the right funding in place is the key to any successful homebuilding project. Whether you’re building your own home, renovating or converting an existing property or making some home improvements – every project is completely unique and requires made-to-measure finance.
When should I start thinking about finance?
It’s important to fully understand your budget and borrowing options early on because by choosing certain design elements before discussing your finance, you may unwittingly be limiting your choice of lenders and mortgage products.
Should I speak to a specialist mortgage adviser?
With so many factors to consider – construction type, design, ground conditions etc – it makes sense to consult an expert with in-depth knowledge not only of self build mortgages, but also construction. What’s more, by approaching a specialist mortgage adviser like BuildStore, you’ll have access to a wide range of lenders and products, and they can confidently recommend the mortgage best suited to your individual circumstances and project requirements.
How do self build mortgages work?
Self build mortgages release funds in stages – in arrears or in advance. Depending on your individual circumstances, your stage payments will either be guaranteed based on your costs, or rely on an uplift in value at each stage.
BuildStore’s unique cost based mortgages provide guaranteed stage payments based on your build costs either before or after each stage of works, depending on your payment schedule. This wayyou will have certainty in your budget, and peace of mind knowing you’ll have the cash you need.
A valuation based mortgage releases funds to buy the plot, and then after each stage of works are complete – where a valuation has taken place showing an uplift in value. This can cause problems because there is a risk of the property being devalued during the build.
How much can I borrow?
It depends on your financial circumstances and how much you can afford. As with any mortgage,lenders will assess your income and outgoings to calculate how much they are willing to lend you. However, unlike a traditional mortgage, your borrowing is not limited by the plot or property’s current value. With astandard self build mortgage you can typically borrow up to 75% of your project costs, while with BuildStore’s higher lending percentages you could borrow up to 95%, or 100% if you already own your plot, with a maximum of up to 85% of the expected end value of your new home.
What’s the most important thing to consider when choosing a self build mortgage?
The lowest rate, minimal fees and the total loan amount may be uppermost in your mind for a house purchase, but when it comes to self build, the single most important factor is cashflow, and ensuring sufficient funds are available, at the right time during your build.
At BuildStore, we will thoroughly check your costings and prepare a tailored cashflow for you that forms your payment schedule, so that you know you have the necessary funds available at each stage, and there are no nasty surprises.
Which self build mortgage is right for me?
You’re building a bespoke home and just as no two projects are the same, there’s no one-size-fits-all solution. The right mortgage for you will depend on your individual circumstances, build and payment schedule. At BuildStore we can tailor your funding to suit your payment terms and your project costs.
What interest rates are available?
Interest rates currently range from 4.29% – 5.99%, with most lenders offering interest only during the build – so you only pay interest on the funds drawdown and keep your monthly payments affordable. What’s more, when your new home is complete, you can switch to one of your lender’s traditional mortgage deals, which will have a lower interest rate and bring your payments down.
For more information and expert advice on self build mortgages call BuildStore on 0345 223 4888 or visit www.buildstore.co.uk