Tag: self-build mortgage

Financing a self-build project to suit multi-generational living

When our new clients decided to build their own home, they wanted to find out as much as they could about the self-build process. As well as talking to us and undertaking a lot of online research, they also attended several conferences designed for self-builders. They found the conferences particularly useful when it came to researching ways of financing their self-build project.

When our new clients, Roselin and Martin, decided to build their own home, they wanted to find out as much as they could about the self-build process. As well as talking to CB Homes and undertaking a lot of online research, they also attended several conferences designed for self-builders. They found the conferences particularly useful when it came to researching ways of financing their self-build project.

Roselin says,

“The conferences have a bewildering amount of information and all sorts of exhibits, which are a lot of fun to look at. The most valuable thing we found was attending presentations on financial advice, especially when it came to how to find a lender when you want to build your own home.”

There are a number of different ways of financing a self-build. Some people can use cash, others may raise the money by selling or remortgaging their existing home. You may be able to secure a custom build mortgage or look at bridge finance. A self-build mortgage may also be an option. You can read about the differences between a self-build mortgage and an ordinary mortgage here.

In this instance, Roselin and Martin are selling their current home and drawing down some pension funds too in order to finance their project.

Challenges of financing a self-build project

Roselin says no one should be put off building their own home by assuming it will be too difficult, but she does sound a note of caution.

“The process of acquiring land for self-build can be complicated and quite long and drawn out too. In order to satisfy our lender, we had to jump through quite a series of hoops. We had to find a way to fund the purchase of the land before we could access the mortgage for the build, and there was a time limit placed on the deal too, which made it all quite stressful. It all came good in the end though!

“If anyone asks me about self-building, I would say if you want to do it, start the process early, don’t delay. Do a lot of research too so you learn about the whole process before you begin. I’ve been signed up to CB Homes’ newsletters for years – they are full of useful tips and it all helps you gain a greater understanding what is involved.”

Thinking about building your own home? Wondering about financing a self-build project? Look at our library of self-build resources here and read our past blogs here.

Get in touch with our team to find out how we can help you turn your dreams into reality.

The Self-Build Guide Next Steps: 4. Pre-start checklist

Now you have secured finance for your self-build, selected your project team and worked out timescales for your self-build project, it’s time to run through your pre-start checklist. There is a lot of paperwork involved and if you are managing the project yourself, you need to be sure you have completed every step.

Now you have secured finance for your self-build, selected your project team and worked out timescales for your self-build project, it’s time to run through your pre-start checklist.

There is a lot of paperwork involved and if you are managing the project yourself, you need to be sure you have completed every step.

Preparation for Planning and Building Regulations

Do you have all the right drawings and do the drawings for Building Regulations match the ones for Planning? It’s very important that everything, such as boundary distances and heights, are the same. This avoids falling foul of regulations further down the line, when rectifying mistakes can be expensive and time-consuming.

Once you have planning permission in place, as a self-builder you need to make sure you fill in the paperwork for Community Infrastructure Levy (CIL) exemption.

Make sure your Building Regulations plans and SAP assessment have been submitted and approved.

If your planning permission involves any planning conditions, they need to be cleared if needs be before construction commences. These could be things like supplying details of manufacturers for particular materials.

Are there any specific Planning-lead Building Regulation issues you need to be aware of?

Building Control

Building Control helps keep building standards quality high by ensuring that building work complies with the building regulations, a set of standards intended to protect people’s safety, health and welfare in and around built environments. Have you decided who you are using for Building Control? You will need to make an application before you start work.

If you are going down the replacement building route, check whether you need to submit a demolition notice to Building Control.

Health & Safety

You need to let the Health & Safety Executive know that you are starting on your construction project. Any project that is going to take more than 30 days is notifiable.

Warranty and insurance

Remember to make sure you have a structural warranty for your new home and, as soon as you have exchanged contracts on your building plot, you need to make sure you have insurance. You can get a comprehensive policy that’s tailor made for self builders. It will cover you for public liability, building works, employer’s liability and personal accident.

Services to site

Don’t forget that you will need to bring services to your site via the relevant suppliers. This may require a wayleave if you need to get access to private land or digging on public road. Either way, you will need electricity or gas eventually, and a water supply as soon as construction starts.

A place to live

Unless you are one of the minority who can stay in your current home while your self-build project is under construction, you will need to arrange for a place to stay for the duration of the build. Be realistic about how long this might take, particularly if you are renting accommodation.Contractors and materials

If you are managing the project yourself, you need to issue invitations to tender and select your main contractor and trades.

Remember to make sure that your products and materials are ordered correctly so the lead in times work for your schedule.

Budget for self-build

Right from the start, keep track of what you are spending to stick to your budget. If you are managing the whole process yourself, remember you will need to allow for costs of an architect’s drawings, legal fees, insurance and full build costs. It’s wise to have a contingency budget of around 20% in case you come across any unforeseen issues.

Turnkey package

There’s a lot to think about, long before construction starts. Our fixed fee, turnkey self-build package includes our completion on your behalf of all these preliminary planning requirements, regulations warranties and complete build costs.

Our architects provide planning drawings which we can submit alongside all the other supporting documents for planning. Once planning permission has been secured, we can work with you to make sure all the conditions are satisfied. We prepare all the pre-start documentation too. This includes drawings for building regulations, structural calculations and energy assessments. We can also register your new home with the NHBC and the appropriate local authority too.

Talk to us to find out how we can help you turn your self-build dreams into reality.

The Self-Build Guide Next Steps: 2. Assembling your self-build team

Once you have chosen and secured a plot of land for your self-build project, the next steps are to look at how you will go about designing and constructing your new home.

Once you have chosen and secured a plot of land for your self-build project, the next steps are to look at how you will go about designing and constructing your new home.

With a financial pathway secured, you’ll need to look at bringing together a team of house builders and professionals to work on your project.

Points to bear in mind

It is important to find the right construction partner to carry out your project. It’s equally important to identify a designer who will reflect your vision and ambition. You may have first-hand experience of the industry yourself – you may be a builder or architect, for example – but in the majority of cases, clients undertaking self-build projects need to seek expert advice and guidance when they come to assemble a dream team for their project.

Broadly speaking, there are three ways to approach a self-build project. They all have advantages and disadvantages so you need to choose the one that best suits your needs

1. A turnkey Self-Build solution

Many companies, such as CB Homes, can provide an all-in-one bespoke turnkey self-build service, which means they will oversee a project from design to completion.

What are the advantages of a turnkey self-build solution?

  • The initial Design Consultation should include a free, no-obligation design meeting so you can design your self-build from initial concept with the design team – or you may be able to select one of the company’s own signature designs
  • You can get involved as little or as much as you want to
  • You can tailor the project design to your exact requirements to match everything, from lifestyle to budget
  • You can personalise building plans, which are prepared with a fixed fee quote meaning that what you are quoted is what it will cost
  • You don’t have to pay any money up front. The first payment only becomes due when the foundations are completed – and you can really begin to see what your home will look like
  • The self-build company takes full responsibility for the project, including all insurances and health and safety,  meaning less risk for you
  • There will be a project manager provided as part of the service, who will oversee the whole venture for you and be your single point of contact
  • Your project manager will liaise between you and other members of the project team, such as the architect and site manager. This simplifies the process and any inquiries and discussions can take place on a personalised basis
  • All planning permissions will be obtained on your behalf and your application will be managed for you through to decision
  • Experienced industry professionals can ensure a streamlined application process and should have a longstanding reputation and strong relationships with Local Authorities and planners.

2. Select your own architect and builder

There are advantages to choosing a company that provides a complete package, but there are other options available too. You can assemble your own team by selecting an architect who comes up with a design and then choosing a builder who will quote for delivering it. The builder may have a team of bricklayers and other technicians, such as electricians and heating engineers, or may subcontract these roles.

Advantages to selecting your own architect and builder

  • You may want to choose your own architect if you have one in particular in mind or you have your heart set on a very specific or unusual type of build
  • An architect will make many suggestions and collaborate on the design of the property and incorporate features that you want to include
  • Some architects may be willing to project manage the build themselves and provide warranties
  • If you are employing your own designer and architect, they can take care of any planning submissions required.

Don’t forget…

  • it is quite often the case that many would-be self-builders find that their architect’s plans turn out to be very expensive once they are priced up for building and some compromise on the design may be necessary to bring it back within budget
  • It is important to know who has overall responsibility for the build so in the event of something going wrong, does this rest with the architect or builder as you could be caught in a dilemma of each party blaming the other
  • If you choose this option you need to be confident that your builder really understands the architect’s drawings, so look for past projects, testimonials and reviews
  • if you get several quotes from different builders, make sure they are all quoting for the same specification, so all the quotes are genuinely ‘like for like’.

3. Client as project manager

If you are extremely organised and are prepared to do a lot of research, you may decide to project manage your self-build yourself.

If you are project manager, remember…..

  • It is a very time-consuming process so you need to be prepared for a huge commitment, alongside any pre-existing work or family commitments you may have.
  • Although being your own project manager can be very personally rewarding, remember it’s a huge jump to go from designing a house to actually going on site.
  • Once you have found an architect, a structural engineer and a builder, as project manager you will then be responsible for sorting out pre-start documentation, regulations and warranties. The ‘paperwork and politics’ of dealing with public bodies, local councils and utilities need a massive amount of time and patience.
  • You might think that managing your own build will be the cheapest option. In reality, it may turn out to be more expensive and it is certainly very likely to take longer.
  • You can be taken by surprise by issues such as delivery timescales for materials for example, which can be up to several months, depending on market demand.
  • Lack of familiarity with efficient ways to complete the pre-start documentation and the planning permission process can also lead to quite lengthy delays, considerably increasing the length and subsequent expense of the project.

Trust, reliability and synergy

Whichever of these three routes you decide to go down, when it comes to assembling your team, in addition to professional expertise, it’s also important to bear in mind qualities such as trust and reliability too.

You should research your potential project partners online, by taking a look at their websites. If their website is doing its job, you’ll be able to find accreditations, awards, testimonials and case studies demonstrating a company’s successes, and also that it has the relevant protections and warranties. Being assured that everyone involved in your project shares your passion and enthusiasm is also an essential aspect. 

Assessing all the different aspects of these prospective collaborators will help to inform your decision and find the perfect synergy to realise your dream project.

Financing a self-build

If you are considering a self-build project, there are a number of ways you could finance it.

A self-build mortgage enables you to build your ideal home without needing 100% of the capital yourself up front.

If you are considering a self-build project, there are a number of ways you could finance it.

How to finance a self-build

These include:

  • Cash
  • Raising funds by selling your existing home
  • Remortgaging your existing home
  • A custom build mortgage
  • Bridge finance (if you are selling a property which holds enough equity)
  • A self-build mortgage

What’s the difference between a standard mortgage and a self-build mortgage?

A self-build mortgage enables you to build your ideal home without needing 100% of the capital yourself up front. Rates of interest on a self-build mortgage are typically higher. This is due to the higher risk associated with building a home from scratch and arrangement fees vary from lender to lender. Some lenders consider mortgages for self-builds to cover land purchases (with planning permission), buying a property to renovate as well as barn conversions.

The biggest difference between a self-build mortgage and a standard mortgage is that funds are given to you at stages of the build, rather than a single lump sum. This reduces the lender’s risk and ensures that you don’t run out of funds when you are only half-way through the project.

Stages range from initial digging of the foundations to the final fix. At each stage the value of the build increases. The right funds need to be available at every stage to pay for materials, tradespeople and specialist services.

The amount released at each stage is subject to the lender receiving a satisfactory valuation. The amount you receive may be less than what is detailed in the cashflow forecast. The lender needs to see stage certificates or a letter from a suitably qualified architect or structural engineer or from the structural warranty provider confirming the stage has been completed to a satisfactory level. A lender re-inspection will be required at each stage.

A lender will normally allow you to repay the stage payments on an interest only basis during the build process and then convert to repayment once the build is complete and final funds released.

Two types of ‘stage payment’ self-build mortgage

There are two types of stage payment mortgage – in arrears, which is offered by the majority of self-build lenders. This is where you receive each stage payment after the stage has been completed. The other is in advance, where you receive each payment before the stage is commenced. This is riskier for the lender so is usually more expensive.

What do I need to do before applying for a self-build mortgage?

  • Arrange for a mortgage in principle
  • Find potential plots
  • Assess development potential
  • Arrange a valuation of the plot
  • Arrange a site survey
  • Purchase site
  • Arrange site insurance – specialist self-build, renovation or extension insurance.

Are self-build mortgages really hard to get?

According to Chris Miller, Financial Adviser at CRS Consultants, “self-build mortgages are not hard to get, so long as you carefully prepare all your supporting documentation to assist your adviser and lender, this will also save time with the case processing.”

What criteria are self-build mortgage lenders looking for?

  • Minimum age 18 and maximum age 80 at the end of the loan
  • If you are going to be over 70 at the end of the term, evidence of pension income is required so the underwriter can take into account the likely impact of retirement on affordability
  • You have to sign a declaration stating what age you intend to retire
  • Your nationality and residency history will be noted
  • You must have a minimum of three years residency in the UK and permanent rights to live and work here
  • Evidence of the land (such as brochure, architects drawings, planning development etc)
  • Usually standard construction materials (non-standard can be considered if it’s BOPAS accredited)
  • Your self-build must have a suitable warranty or be architect or professional consultant supervised, for example by:

N.B:  The above member/s can be fellow or membership of these institutions.

Guarantee schemes which are acceptable with most self-build lenders:-

  • Building Life Plan
  • Build-Zone
  • LABC
  • NHBC
  • Premier Guarantee
  • FMB’s “Build Assure”
  • ICW

What documentation do I need to supply to support a self-build mortgage application?

  • Confirmation that you are paid in sterling (GBP) and hold a UK bank account
  • You must have been continually employed for at least 12 months on a permanent contract. Applicant/s who are in a probationary period are acceptable subject to 12 months continuous employment and remaining in a similar role
  • If you have a pay rise pending,  this may be acceptable, subject to written confirmation from your employer that this has taken place prior to the mortgage completion
  • Income from a second job may be considered
  • Fixed Term Contract – Current contract for a minimum of 12 months may be considered
  • Self-employed (you must have been self-employed for a minimum of 1-2 years (depending on individual lenders’ criteria)
  • Your verification name, address, etc (Passport, Driving Licence, Utility Bill)
  • Self-employed – latest two years Audited / Certified Accounts or Accountants reference or latest two years tax calculations and two years tax overviews
  • Directors – where you have a shareholding of 25% or more, the criteria for Self-Employed will apply
  • Maintenance Payments – A maximum of 25% in respect of payments made to the applicant under a Court Order
  • Retirement Income – proof of state and private pensions (statements, P60 and any other evidence to support pension income)
  • Six months bank statements
  • Experian credit report.

What information do I need to supply about the self-build project?

  • A full size copy of plans – floor plans and elevations
  • Full details and evidence of funds you are contributing to the project costs
  • Full name, address, qualifications and a copy of your Architects PI cover; or details of your Structural Warranty Provider
  • If you are renovating a listed building, evidence that the builder or contractor has experience in listed renovations
  • Copy of your planning permission
  • Project Costings (including name, contact details of person completing and date)
  • Your Asset & Liabilities
  • Copy of site insurance
  • Copy of your outline planning permission
  • Architect’s professional indemnity cover (if required).

Do I need to have lots of money put aside for a contingency fund for my self-build?

According to Geraldine Hardman, Director, My Mortgage Brokers, you should always factor in a contingency fund. Around 10% is generally recommended for a flat site, where the ground conditions are known and 20% for a sloping plot or one where you are not sure what may lie beneath the surface.

Geraldine also says, “Building a home is often cheaper than buying a house but unexpected costs can arise. It is important with a self-build that you have a cashflow spreadsheet covering everything to build your home.”

She continues, “Consider Insolvency Protection, which is designed to provide assurance and cover against the possibility of the developer/builder going out of business midway through the build. The cost of work to either complete or get the property to a satisfactory standard whichever is less. Note that in all cases cover is subject to approval.”

How does insurance work for my self-build?

During the build you will need to take out a Site Policy which covers public liability. If you are doing the self-build work yourself you will need to arrange a Contract Works Insurance Policy which covers the build from the first brick to completion. Following completion and sign off by a competent consultant you will be able to arrange a normal buildings and contents insurance policy for yourself if you are going to be the occupant or a property owner’s insurance policy if you let the property out.

If a contractor is doing the work you will need to ensure that they have full contract works for either a one off contract or annual cover with a sum insured adequate for your works and covering the length of time that the works will realistically take to be completed.  Following handover, again you will be able to arrange a normal buildings and contents insurance policy for yourself if you are going to be the occupant or a property owner’s insurance policy if you let the property out.

Chris Miller, CRS Consultants, advises you should speak to your lenders first to ensure that they do not have any demands on the insurance cover that is being placed for the works as they may want their interest noted on the policy or yours as Mortgagees.

Our thanks to Chris Miller from CRS Consultants, and Geraldine Hardman from My Mortgage Brokers, for supplying advice on self-build mortgages for this blog.

N.B. Please note your home may be repossessed if you do not keep up repayments on your mortgage.

DISCLAIMER: this Guide does not constitute financial advice. For any financial advice please contact an approved FCA self-build mortgage lender.

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