4. Arranging Finance
The Self Build Mortgage
- What a lender needs to know: the essentials:
- How much will it cost to build the house?
- Can you afford it?
- What building materials will be involved?
- How will the building work be managed?
Two Types of Self-build Mortgage
- Payment in arrears
The more common form of lending. A series of payments are made on the completion of key building stages. E.g. at Foundations – Structure – Roof - Completion
- Payment in advance
Offered by a few lenders a series of payments are made in advance of the commencement of key stages. A detailed programme of work is agreed between the borrower and the lender
Apply for a Mortgage when:
- Outline or preferably detailed planning permission has been obtained.
- A building system has been decided upon and key materials chosen.
- A cost summary of the proposed building works has been produced.
- As a rule, the more detailed the building proposal is, the easier it is to borrow money.
- Most lenders by nature are conservative in their lending. This can be a problem for the Green self builder when it comes to building systems that vary from those used by volume builders. An unusual system backed up by a full report including evidence of existing buildings that use the system as well as supporting information from the system manufacturer, will help instill the necessary confidence.
What the Mortgage Lender will need to know
Have you got planning permission?
If you're building a new house you will need planning permission. You should try and get an accurate cost for constructing the house. Usually either an architect or a quantity surveyor (a professional building cost manager) will be able to do the job. Another possibility is to use a costing service provided online.
Are there any onerous planning conditions?
Planning permissions are usually straightforward. But look out for the conditions usually attached. Sometimes they can involve significant expenditure by requiring, for example, new infrastructure such as an access road. Also, there may be tree preservation orders which might compromise your design.
How confident are you about the costings?
The more detail you can provide at this stage, the happier the lender will be. It's advisable to have a good idea of what your building, how big it is and what it's made from. You will need to provide a worked out budget. The total cost should be broken down into areas.
How are you building the house and what materials are you using?
The conventional ways of building a house, used by the volume builders will not normally appeal to the ‘Green’ self builder. A number of building systems and materials already used on the continent, are still relatively new in the UK. Lenders need to be assured that your environmental choices don't compromise building integrity. It's useful at the application stage together as much information about your chosen system/materials as possible. Get the manufacturer or building materials supplier to help.
Have you insured the works?
Both from yours and the lenders point of view, its necessary to ensure that if anything goes amiss during the construction, it is covered by suitable insurance.
If you’re not using an architect, have you got a Structural Warranty?
If you don’t have an architect certifying the works as they progress, you will probably need a Structual Warranty. The warranty will cover structural defects in the building that become apparent for a period usually of 10 years after completion.
‘Green’ Self-build Mortgage Lenders
- BuildStore Eco Accelerator Mortgage
- The Eco Accelerator Mortgage does not simply focus on energy performance and generation, but also on the building fabric too. It promotes healthy living by rewarding you with a discounted interest rate for the lifetime of your mortgage, when you select sustainable building materials with a reduced global impact, while also ensuring your property is energy efficient. It's a simple approach that goes a step further to minimising global impact.
- www.buildstore.co.uk/finance/Eco-Accelerator-Mortgage.html s