If you have selected a plot of land and want to build your dream house according to your own specifications, but do not have the large amount of cash required for it all, a self-build mortgage is the way to go. These loans allow money to be released during different stages when building a house. Different deals will allow you to get a loan for up to 95% of land costs, up to 95% percent of construction costs, or up to 95% of the final value of your home, depending on your lender.
Building your dream home can be stressful. You will have to take on the entire responsibility for the project, from selecting the land, financing the build and looking after construction work to dealing with every little unforeseen problem along the way. The finance element is probably the most crucial to get right, as all other factors depend on it, so:
1. Start by talking to a mortgage adviser, who can give you a clear understanding of how much you can borrow, and from where.
2. Select a plot with outline planning permission, and have a self-build mortgage agreement in principle ready, so you can buy the site quickly. Get a preliminary survey done on the land.
3. Contact the architects, surveyors and planning officers and complete the design and costing part of the construction. The next job is to finalise the mortgage application if and when planning approval has been granted.
A large number of high street lenders will now provide you with a self-build mortgage, although not for commercial property projects, so you will have to be the owner-occupier of the finished house. The loan money is not made available all at once, but will be released gradually at different stages of the project, which are typically when:
â?¢ The plot of land is purchased
â?¢ The foundations/initial groundwork are complete
â?¢ The walls or timber frames are complete up to the eaves
â?¢ The house is windproof & watertight
â?¢ Services are installed
â?¢ The project reaches completion
There are two types of self-build mortgages: the traditional way with stage payments made in arrears, and the newer sort where payments are made in advance of each stage listed above.
Some lenders will agree to provide a loan for land acquisition, some insist that you buy the land yourself and then get finance for building purposes. Schemes and deals vary greatly between lenders, so it's best to talk to an independent mortgage adviser, who can give you details specifying how much you can expect from a wide variety of lenders. Like any regular mortgage, you will have to provide some conclusive evidence of your income, undergo credit checks and confirm your identity. Interest rates and mortgage terms should be comparable to any regular deal.
Author Terry Underhalldate added 2009-09-02 13:09:29