5 common self build finance questions answered
Buildstore have put together some of the most common questions asked about self build finance to provide you with all the answers.
I am currently looking for a plot. Should I organise my finance now or wait until I have had an offer accepted?
As a result of the credit crunch, lenders are now more cautious and it will pay you to get your finances in order to put you at an advantage so that when you do find that ideal plot you can move quickly to secure it and beat the other people who will be after it.
Going to a mortgage intermediary who understands the self build market will help you here. They will be able to talk to you about what you want to build and the costs involved and will be able to tell you if you are likely to be able to borrow the amount you need in the current lending climate. By doing this you will be able to move speedily and with more certainty when you find that plot.
One way we have been able to help clients who have not yet found a plot to be ready to secure their plot quickly is by switching their current mortgage to an offset account with a pre-agreed cash drawdown facility. This gives them quick access to the deposit they need for their plot without having to pay any interest on the amount until it is drawn down.
How are the funds released for a self build mortgage?
The release of funds varies from lender to lender, some of whom have some strange and complex formulas for this! Some lenders will release funds by releasing a certain percentage of the total loan as the build which can cause some cashflow issues as this won’t necessarily fall in line with your build costs. This is particularly important when considering a timber frame build. Other lenders however will release funds based on the completion of a defined stage, the amount can be based on either the valuation at that point, or indeed the actual costs which makes much more sense.
Do I need cash to buy the land?
The simple answer to this one is No. Most lenders will release funds from the mortgage to enable the land purchase, you will however require a deposit, normally a minimum of 15%. Some self builders will have the cash available to purchase the land but we would recommend that you don’t purchase the land with your own cash until you have researched and organised your mortgage for the build in principle.
How does the Accelerator Mortgage work?
The Accelerator Mortgage is a self build mortgage which is exclusive to BuildStore Mortgage Customers. The difference between the
Accelerator Product and all other self build products is that the funds are released in advance of each building stage, instead of once you have completed the stage. This offers a major cashflow benefit to the self builder, and is ideal for Timber Frame builds, as it enables the mortgage funds for the frame to be released prior to delivery. Most other schemes would not release the funds for the frame until it is erected which can cause a funding gap as without the cash to purchase the frame it will not be delivered and erected!
Do I need to sell my existing house?
The answer to this one can be a little complex if you have a mortgage on your current property and is driven simply by affordability. Your broker and the lender will consider, by looking at income and expenditure (both committed expenditure and lifestyle) to ascertain whether it is affordable for you to continue to pay the existing mortgage and the new one. BuildStore has worked closely with lenders on this scenario and most of those we work with will take the view that the existing mortgage should be looked at on a short term basis (ie you will sell it once the new build is complete) and this eases the affordability issue. We can also look at covering the cost of the existing mortgage using savings for instance (for perhaps a 12 month period) which will then enable the lender to effectively ignore the existing mortgage payment when looking at the affordability.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
For arranging self build and custom build mortgages, BuildStore charge a fee of £695. £95 is payable on application and a further £600 on offer. For all other mortgages BuildStore charge a fee of £395 which is payable on offer.