Self-Build Mortgages – What to Know

Every self-build project is like a dream come true, as it enables one to design a very personal and unique home that matches their vision. However, financing a self-build project differs from buying an existing property. A self-build mortgage is a requirement for most people looking to build their dream home.

At TOMVA, we try to ease the intricacies of self-build projects. Moreover, one of the more important elements is self-build mortgages. Let us understand self-build mortgages so that you can make informed decisions about your new home.

What is a Self-Build Mortgage?

A self-build mortgage is meant for individuals looking to build their house instead of purchasing it. Self-build mortgages differ from traditional mortgages by offering staggered release of funds based on construction progress. Rather than giving funds all at once, these mortgages are paid out in installments as the building progresses. Furthermore, ensuring that funds are readily available as needed greatly reduces risk for lenders.

Self-build mortgages can be classified into two types:

• Arrears stage payments

Funds are issued post-inspection at various building stages.

• Advance stage payments

In this type, the funds are provided for each stage of the project and disbursed in advance. Therefore, granting sufficient liquidity to commence construction work.

None of the two types are perfect. Therefore, you will have to make your decision depending on your financial situation and the conditions of your loan agreement.

Reasons to choose self-build mortgages

The following are the perks of choosing self-build mortgages:

• Convenience: You are free to choose the energy-efficient features and design to match your requirements perfectly.
• Cost-effective: Custom building your home is often much cheaper than buying a house already built according to the market standards.
• Customization: You can customize all aspects of your home, from the materials used for construction to the little finishing touches.

Self-build mortgages do offer benefits. However, with the perks come drawbacks like extended timelines, additional costs, and more. Therefore, you should be careful with your planning.

At TOMVA, we have a team of seasoned builders who can help reduce the risks associated with such projects.

How to apply for a self-build mortgage?

• Drawdown an agenda
• Prior to contacting your lenders, it is necessary to have a well-defined agenda for your project. This consists of the following:
• Architectural sketches and designs.
• Budget capturing materials, labour costs, and buffer funds.
• Approvals and planning permissions.
• A complete timeline stating each construction phase

Lenders will want to know that you have put effort into understanding your project. Moreover, evaluating its feasibility. At TOMVA, we offer assistance to clients with the cumbersome matter of design and planning. In addition, make sure their documentation is in order.

Search for a suitable lender

It is crucial to note that not all lenders give the option of building mortgages. Thus, it is crucial to do your homework. Search for a lender that has experience in self-build projects such as:

• Interest rates
• Loan-to-value (LTV) ratios
• Payment structures based on project phases
• Other charges

Unlike regular home loans, many lenders demand higher deposits for self-build mortgages. The average estimate ranges between 25% and 40% of the project expenditures.

Identify the funding release phases

Funds are commonly issued in intervals, a portion released after the completion of each one of the following parts of the project:

• Buying the land
• Laying down the foundation
• Structure completion
• Interior works and finishing

Funds are released during every phase of construction. However, first, an inspection of the work that's been done needs to be completed to verify if it meets the pre-agreed standards. Having a professional team like TOMVA working with you helps ensure that your goals are met, and your schedule is on track.

Budget the extra cost

Self-managed projects are often costlier than the construction cost. Therefore, be sure to budget in the following:

• Client account withdrawals
• Planning permission submission fees
• Insurance policies such as client warranty and self-build insurance
• Water, electricity, and gas connections

To cover unexpected costs, having a reserve of at least 10% of your budget is highly recommended.

Challenges with self-build mortgages

There are plenty of pitfalls that come with a self-build mortgage. Some of them are:

• Postponements: Weather conditions and other supply chain issues can greatly impact deadlines.
• Over budget: In cases where there isn't enough reserve set aside, unplanned spending can become a real strain.
• Permits: Obtaining planning permission has a few steps. Not to mention mortgage permitting.

With TOMVA, you get guaranteed smooth transitions throughout the entire build. Moreover, project management enables you to hurdle obstacles like these with ease.

How can TOMVA help you?

TOMVA recognizes that self-building is more than a monetary project; it is deeply personal. Our services encompass the entire construction process, right from the initial planning stage to the final building handover. We provide:

• Design and planning: Our staff collaborates with builders to produce designs that comply with local authority regulations and further meet clients' expectations.
• Surveys and assessments: We furnish detailed topographic and structural surveys, as well as other invaluable reports for our clients.
• Engineering knowledge: We civil and structural engineers undertake construction projects to ensure works are not only satisfactory but safe and legal.
• Project control: We manage the project from beginning to end, managing projects, site contractors, relevant timeframes, and costs.
• Sign-off and registration: We give in-depth certified accounts that enable our clients to comply with the requirements of lenders, banks, and lawyers.

Conclusion

Get in touch with TOMVA today if you're looking for a self-build project. We would be delighted to assist you with realizing your vision of a well-constructed building.