Pre-Start Essentials: Mortgages

There are many ways of getting hold of the money you'll require to finance your self-build, renovation or conversion dream. In many ways, the principles of a self-build mortgage are the same as those for a conventional mortgage lending criteria is usually income based, meaning that lenders will be willing to provide up to around 5x a single income or, based on other criteria, up to 60% or so of your monthly disposable income. Payments will be the same and most self-build mortgages have the same payment options as conventional mortgages: fixed rate, interest only and so on. In addition, you'll still have to raise a deposit in the same way that you would for most conventional house mortgages most lenders offer a maximum loan to value of 95% on the land and 95% of the actual build costs.

The way it differs is that lenders tend to release payments in stages rather than all at once securing their own investment as progress continues and the asset becomes more valuable.

Normal stage payments for self- build mortgages:

Masonry

• Purchase of land
• Foundation
• Wall plate
• Weathertight
• First fix/ external render
• Completion

Timber Frame

• Purchase of land
• Foundation
• Kit erection
• Weathertight
• First fix/ external render
• Completion

You'll notice with the stages(above)that the problem with traditional self-build schemes is that payment was only released after each stage had been completed not exactly in tune with the way the building (and particularly timber frame) industry worked. As a result, the two leading self-build mortgage providers offer advanced, not arrears, funding. The Accelerator Mortgage, developed by BuildStore, and the Advanced Flexible Selfbuild Mortgage from Riley Associates, are provided by many leading lenders and offer upfront stage payments in addition to being much more in tune with the finance issues faced by self-builders. Contact them directly for more information.

Renovators can now also benefit from advanced mortgages. BuildLoan Refurbishment Finance releases up to 95% of the cost of the property being improved and will then release up to a further 95% of the cost of the improvements, released in advance of stages.

Its also possible for self-builders with a particularly good relationship with their banks and building society manager to come up with a more informal arrangement. Many self- builders set up a simple business account with an unlimited overdraft which can be drawn upon for writing cheques throughout the project and then converted into a standard house mortgage upon completion; others use loan arrangements mixed with private funding to meet the requirements. Most high street banks now understand the needs of their self-building clients but, in truth, success depends very much on the individual relationship with the branch manager.

Read the Rest of the Pre-Start Essentials Guides:

• Warranties
• Insurance

Further reading:

• A Guide to Starting a Self-build Project
• All About Self-build
• Building Contracts: When Things Go Wrong

Further contacts:

• UK Mortgages from Confused.com