Mortgages

Self Build Mortgages

House As the old saying goes, 'If you want something done right, do it yourself.' Those looking for a house that's just right can now benefit from the growing range of self build mortgages.

A self build mortgage enables you to create your dream home from the foundation upward, and the variety of different self build mortgage plans cater to the needs of all types of DIY homebuilders.

That said, it must be noted that a self build is not for everyone. It takes perseverance to see the project through from its planning stages until completion. As well, many self build mortgages will only cover 75% of the overall cost, and funds must be available to make up the difference.

Most people interested in a self build have very specific ideas about their ideal home. The first step in securing a self build mortgage is to work those ideas out in detail, by choosing a property and consulting with an architect and an estate agent to draw up building plans.

With these professionally drafted specifications you can approach lenders about a self build mortgage. When considering which mortgage product suits you, reflect on your current housing and financial situation.

House If you already own a home with spare equity, a second mortgage can save you the headache of moving into an apartment during the building process. Some more adventurous DIY homebuilders choose to live in a caravan on site during the build, but this is likely impractical for families with children.

Self build mortgages differ from standard mortgages in that the loan is paid out in four or five portions that correspond with different stages of the build. As well, most lenders will set a time limit on the build, generally no more than 24 months.

A traditional self build mortgage pays out as the different stages are completed. These are known as arrears payments. For example, the first payment is made after the conveyancing of the property, the second after the setting of the foundation, and so on. This kind of self build mortgage usually covers 75% of the building costs, and as such requires some outside funds.

House A newer kind of self build mortgage has recently come onto the lending market the advance payment self build mortgage. It offers up to 95% of the build's costs and distributes the payments in blocks before the particular stage of building begins.

This kind of mortgage is very popular among those interested in a self build but lacking other equity. It does not come without its costs, however — most lenders require the borrower to take out an insurance policy to cover costs in case the build founders. Also, it charges a higher interest rate.

Despite the challenges of going DIY with a self build mortgage, the rewards can be substantial. Not only can you tailor a home to your own wishes, but self builds on average are worth 30% more than their overall cost directly upon completion.

A dream home? A cash cow? Either way, a self build mortgage is a means to a good investment.

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