Self Build Mortgage
Can I get a mortgage on timber frame?
There is a common misconception that it’s difficult to mortgage a timber frame or SIP build system, but this simply isn’t true. They are actually considered to be a standard construction methods by self build lenders, and one in three self builders choose an offsite manufactured structural timber system for their new home.
When it comes to funding your project, it’s likely that you will need a stage payment mortgage, which releases funds as your build progresses. The Accelerator mortgage (created by and exclusive to BuildStore) releases funds in advance of each build stage, which is ideal for timber frame projects, as you need to pay for your frame before it’s delivered and erected onsite.
Lending criteria can be restrictive when it comes to the material used for the outer skin of your build, as this is what protects it from the elements and is key to its visual appeal. It’s a good idea to speak with an expert mortgage adviser before deciding on your construction method, to ensure that it’s mortgagable.
When is the right time to think about funding my project?
The most successful self build projects are those that have been planned well from the start and this means knowing your budget and understanding your borrowing options early on.
We recommend that you speak with an expert mortgage adviser in the early stages of your project, as there are many factors to consider when self building. For example, buying and paying for your land, cashflow, build costs, construction type, planning permission, affordability and where you’ll live during the build can all impact on your finance.
Think of it this way, if you’re buying an existing property, you need to know how much you can borrow before you start looking. It’s no different when it comes to self building, it’s actually even more important!
How does a stage payment mortgage work?
A stage payment mortgage differs from a standard house purchase mortgage because the money is released in stages as the build progresses, rather than as a single amount. At each stage of your project, as the value of the build increases, a percentage of your overall funds will be released.
There are two types of stage payment mortgages and they are defined by when funds are released during the build, either in arrears or advance and are tailored to suit both your income and the stages of your project.
Arrears or Advance stage payments?
The type of stage payment mortgage best suited to you will depend entirely on your individual circumstances, project and cashflow requirements. It pays to speak to an expert mortgage adviser who can assess your situation to determine which type is right for you.
Your stage releases should reflect your costs and payment terms of your trades people and suppliers. Remember, your payments may need to be made monthly, weekly or even daily and it’s important you have the funds available when you need them to pay your bills.
- Arrears stage payments
With a traditional arrears mortgage, funds are released to purchase the plot, with the remainder at each stage of your project once it’s completed and a valuer has visited the site. This option may be best suited to you, if you have sufficient savings to fund the early stages of your build as well the deposit on the land.
For example, if you already own your plot of land and can remortgage it to provide funds to start the build, or if you’ve already sold your existing house and have cash available to buy the land and start the build, then an arrears mortgage may be the best option for you.
- Advance stage payments
The Accelerator mortgage (created by and exclusive to BuildStore) releases funds in advance of each build stage, rather than in arrears. This means you have the cash you need to fund the early stages of your build – including the plot purchase.
With an Advance Stage Payment Mortgage you can receive the money to pay for your timber frame, when it is required. It is ideal for timber frames, where because of their bespoke nature, you can be required to pay for as much as 90% of the system before it leaves the factory.
It’s also possible to borrow more with the higher lending percentages available with the Accelerator mortgage, up to 95% of your plot and build costs to be specific.
If you only have a small amount of cash available and don’t want to sell your existing house to release equity before your new one is complete, or you want to keep your cash until later in your project to maintain a good contingency fund, then an advance stage payment mortgage could be the best option for you.
Case Study - Read how Potton self-builders Bill & Angie Jenkins financed their new home
Do I need to sell my existing house before my self build is complete?
This depends on how you fund your build and how much cash you have in savings. If you choose an arrears stage payment mortgage, you’ll need a minimum deposit of 15% of the plot price, as well as money to pay for the early stages of the build. If you don’t have sufficient savings, you may decide to sell your current house to release the equity before starting your new project.
If you don’t want to sell your current house and move into temporary accommodation before your new build is complete, the BuildStore Accelerator mortgage may be right for you. The higher lending percentages and advance stage payments during your build will ensure that cashflow is not an issue, so you can continue living in your current house until you’re ready to move.
How much can I borrow?
It’s possible to borrow up to 95% of your plot and build costs with BuildStore, and if you already own your plot, it may be possible to borrow up to 100% of your build costs.
How much you can actually borrow depends on your financial circumstances and how much you can afford. Just like with any mortgage, lenders will look at your income and outgoings to calculate how much they are willing to lend you.
How much deposit do I need?
Once you know how much you can borrow, you can then work out what you’re able to provide as a deposit (or equity if you’re moving home).
The minimum you will need is 5%, but the bigger the better really! The bigger your deposit the better the rates will be and the better your chances of being accepted for a mortgage.
Should I use a mortgage adviser to arranging my finance?
The short answer is yes. When it comes to funding your self build, there are many factors and borrowing options to consider. It pays to speak to an expert mortgage adviser who can look at your financial circumstances and project requirements, to recommend and tailor a borrowing solution to suit you and your new home.
Are there other borrowing options available or do I need a self build mortgage?
A self build project doesn’t always equal a self build mortgage. There are other borrowing options available which might be more suited to you, and choosing the right one can ensure that the journey to your new home is as smooth as possible.
If you have enough equity in your current home or own it outright, you could remortgage or secure a bridging loan to pay for the plot, fund your build costs or both. Then when your new home is finished, you can sell your old one to pay off the loan. This way you can stay in your current home during the build and avoid the upheaval of moving, living onsite or renting during the build.
We recommend you speak to an expert mortgage adviser who can recommend the right borrowing solution to suit your needs and circumstances.
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 of a mortgage. For all other mortgages they charge a fee of £395, which is payable on offer.