Funding a home building project
Expert: Rachel Pyne, Director of Financial Services, BuildStore Financial Services
With plot prices at their lowest in years, a flat housing market, and a UK Government policy to support and grow the self build housing sector, there’s never been a better time to build your own home. It’s not all about ‘Grand Designs’ with huge budgets, but whatever you choose to build, you will have to consider how you are going to fund it.
It’s never too early to get your budget and finance organised. The sooner you know how much you can borrow and what cash-flow you need, the better. Talk to a specialist - BuildStore can help you with your costs and budgeting, as well as advising what mortgage products are right for you – we have arranged mortgages for tens of thousands of home builders, so we know what we’re talking about!
Self build and renovation mortgages are released in stage payments, not as one loan amount as with a typical house purchase, so the most crucial aspect of managing your finances is understanding your cash-flow requirements, based on your project and your own circumstances. You can run your self build mortgage alongside your existing mortgage, and you don’t necessarily have to release equity by selling your current home to fund the build.
There are two types of self build stage payment mortgages, defined by when you get money during the build; they are traditional or arrears andadvance, and once you assess your cash-flow, you will be able to select which type is right for your needs.
Traditional: Typically, you can borrow up to 85% of both the purchase price of your plot or renovation project, and your building costs, which is released once the work for each stage has been completed. This means that you will fund the early stages of the build, and is a good option for those who already own a property or plot.
Advance: Exclusive to BuildStore, the advance mortgage, known as the Accelerator, releases funds at the beginning of each build stage. You can borrow up to 90% of the cost of the land or renovation property and up to 90% of the cost of the building works, thus providing you with a positive cash-flow throughout the project.
Whether you opt for an advance or arrears stage payment mortgage, your application will be assessed on all the usual factors, such as income, and disposable earnings, credit hostory, employment history, Loan-to-Value required. Lenders will also want quite a lot of information about your project, including your chosen construction method, seeing architect’s plans, and proof of adequate insurance for your project. They will also usually inspect your progress at the end of each build stage before releasing the next tranche of funds.
BuildStore works with leading lenders and has access to over a dozen exclusive products on both an advance and arrears basis that you won’t get anywhere else, and can professionally and properly assess your project and cashflow requirements to recommend the right funding solution and product for your circumstances.
