First things first
Mary Riley, a specialist adviser in mortgage funding solutions for custom-build and self-build projects, says that there are several things to get right first before seeking a mortgage
knock down or renovate your existing home and build your dream – or you’re part of a group self-build project – one thing holds true. You should not rush into getting a mortgage! Before you source funding, you need to be sure about several key aspects of your project.
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Temporary accommodation Where are you are going to live when you start your project? Do you want to live in your current home, in rented accommodation, in a caravan on site, or elsewhere with family. Your answer to this question is crucial, as where you intend to live while you build will have an impact on how much money you can afford to borrow to build your dream home. For example the monthly rental payments or
monthly mortgage payments will have an impact on your affordability calculation. Some lenders will accept you making upfront rental payments so that the impact on your monthly income versus expenditure is reduced.
Construction method
Each lender’s criteria is different, so ensure they are aware of your build type and of the
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hether you have identified a plot of land for development, a barn con- version opportunity, or you want to
payment terms and conditions your building contractor has stipulated. Do not agree any payment schedule with
your builder or building materials supplier until you know how the lender will release funds.
Each lender’s criteria are different, so ensure they are aware of your build type and of the payment terms
Comprehensive costing
Full project costs including a budget control esti- mate need to be identified before you progress to the stage of obtaining a mortgage. These costs include:
• land purchase and associated fees • project management, including HSE compliance
• gaining planning consent, if not already achieved, and associated fees • demolition and/or site preparation • construction and design fees • construction costs (estimated against Building Regulations drawings preferably)
In addition, you need to demonstrate to the lender that you will have sufficient funding abil- ity and competence in place to complete the project and add a 20 per cent contingency.
Build costs
Some lenders require that you must work to a fixed build cost budget, others may request that a qualified quantity surveyor provides the infor- mation on the costs to build. Ensure that you build a minimum of a 20 per cent contingency into your build costs estimate.
Moving on to the mortgage
Having finally got the above factors clarified, you are ready to discuss the mortgage funding you require to undertake your project. However there are various issues to consider here. There are a number of options for financing
a self-build; these break down into stage release mortgages, a bridging loan, and/or raising capital against an existing property.
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