| Building
your own home to your own specification is for most people
a daunting but ultimately rewarding task. But easing the path
is the growing number of lenders now willing to back your
self build home with hard cash.
Norwich & Peterborough building society
is the market leader for self-build home loans, with more
than 10% of all of its mortgages granted to self-builders.
But there are a number of other lenders entering this growing
market, from the Ecology building society, a specialist in
environmentally conscious homes, through to giant high street
names such as Lloyds TSB.
Moneyfacts lists 31 lenders who offer finance
packages for self-build. However, you will still need a reasonable
reserve of cash to start the process. The main rule of thumb
is that a lender will give you up to 80% of the valuation
or purchase price of the plot of land and release more money
to cover the cost of building in stages dependent on an ongoing
valuation. Most will release the full sum of money (with a
maximum of 95% of valuation) once the roof is in place and
the building is near completion.
Mortgage companies insist that the self-build
project has to be for your own occupation and nearly all rule
out lending against the building of flats or maisonettes.
Before they will grant you a mortgage, lenders
will want to see a number of documents:
• Outline planning permission for the
initial advance.
• Detailed planning permission for the
first stage of building finance.
• Building regulation approval.
They also want to know who is building it.
"Self-build is a bit of a misnomer. You can do a self-build
without ever picking up a brick if you use sub-contractors,
although the cost of labour can mount up," says N&P's
Alison Lipscombe.
However, your lender will want to be satisfied
that the builder or contractor is a reputable company and
is registered with the NHBC. Generally speaking, self-build
is not for the keen DIY amateur, although there is a growing
number of house building kits on the market.
Once you have found a plot of land, a lender
and a builder, the next stage is obtaining the staged release
of funds during the building process. For example, N&P
gives you 15% of the total loan amount once the foundations
are in place, a further 15% at first floor joist level and
15% at wall plate level. "At each stage the society's
valuer will carry out a re-inspection before the next stage
payment can be released. Architects' certificates will also
be required where appropriate," it says.
Anyone considering undertaking a self-build
should also factor in other costs. The list can run on and
on and includes valuation fees, the cost of connecting services
such as electricity, gas and water, professional fees, VAT,
stamp duty and legal costs.
Making a realistic assessment of the true costs of self-build
is essential:
• Don't turn a blind eye to what the
real costs are going to be, or rely on the black economy to
cut corners.
• Assess how long it will take; the
fastest self-build kits can be put up in a few months, although
most projects take at least one year.
• Think about employing a project manager.
Although this can add 15% to the total costs, not having one
will mean that you have to deal personally with the architectural
plans, planning permission, ordering and delivering materials,
handling sub-contractors and so on.
• Begin the work in winter, when contractors
can be both cheaper and easier to hire.
• Avoid paying unnecessary VAT. You
can get back all the VAT you pay on materials by registering
as a self-build project before you begin work, so remember
to save your receipts.
• Maximise the amount of labour time
you can put in, as labourers cost anything from £50
to £100 a day.
• Obtain an NHBC 10-year certificate
at the end of the project. These cost only a small sum, although
you will have to pay surveyor's fees.
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