Financing a Timber Frame Self Build

The use of a timber frame - and in particular a timber frame from one of the multitude of package suppliers - has implications not just for the construction of the house but also for the financial arrangements of the self-builder. While the total price of the timber system is similar to that of a conventional building system, the way the project is funded is very different, and will have significant implications for the project's cash flow.

This is because timber frame package companies generally require a substantial deposit when you place the order, as the frames are built as one-offs to serve a bespoke design. The actual terms vary from supplier to supplier, with some, such as Taylor Lane, requiring a 10% deposit on order with the balance to be paid after delivery; while others- probably the majority- require the balance to be paid before delivery of the frame. This causes problems for those using traditional stage payment mortgages that release funds in arrears (i.e. where money is released by the lender after certain stages have been completed) as they will have to find the funds to pay for the frame well before the lender releases the money. In many ways this was the raison d'tre for the two leading advance cash flow mortgage schemes: the Accelerator from BuildStore (www.buildstore.co.uk) and the Advanced Flexible Self-build Mortgage from Riley Associates (riley-associates.co.uk). In exchange for an indemnity insurance premium funds are released in advance stages.

Typical stages for a timber frame build are thus:

• Stage One: To complete foundations and pay deposit on timber frame
• Stage Two: To erect timber frame
• Stage Three: To achieve wind and water tight shell
• Stage Four: To achieve first fix and external rendering
• Stage Five: To completion

The other problem that timber frame construction may pose for the self-builder is security. Building companies are as likely as any other to default during the course of their existence and for the self-builder paying a large sum upfront in advance of materials arriving on site should be avoided wherever possible. Self-builders should insist on any large sums they pay in advance of delivery being placed in an independent third-party account (which can be set up and administered by a solicitor) through which the supplier knows that the money has been paid, but can only get access to upon satisfactory completion of the work. Most self-builders `mix and match' borrowing and credit from several different sources to help fund their build. One option to help fund the upfront cost of a timber frame is an equity release loan - a further advance secured against equity in the self-builder's current home.

In the same way that the provision of funding for timber frame homes has changed over the last few years, the number of lenders willing to offer loans against timber frame construction has significantly increased and their attitude changed. Whilst it is an exaggeration to say that in previous decades timber frame self-builders had great difficulty finding lenders, it is undoubtedly true to say that it is now impossible to find the head office of any established self-build mortgage lender unwilling to lend against this form of construction. The response of Norwich & Peterborough's head office is typical. "Essentially N&P will consider lending on any type of property provided it meets British construction standards. We welcome mortgage applications for properties of unusual design or construction and are keen to promote energy efficient properties. We will even lend on properties built of straw bales." If that were not enough, the Council of Mortgage Lenders recently called timber frame 'a real success story'.

The key problem for many, however, will be the attitude of lenders in the branches on a local level: not all local managers are fully versed in unconventional building routes (and, to that end, many remain unaware of their head office's ability to actually lend on a self-build project) and it remains entirely down to the self-builder to be pro-active and, in some cases, actually present their lender's policy to the local manager.

Timber frame self-builds:

• A Three Bedroom Oak Framed Home
• An Energy-efficient Timber Frame Self-build
• A Contemporary Timber Frame Home

Further Reading:

• The Evolution of Timber Frame
• How to Choose Your Timber Frame
• Timber Frame or Blockwork?
• A Guide to Construction Systems