Self Build

It is estimated that of the 200,000 new homes built in the UK last year approximately 20,000 were self-build developments, this is a two-fold increase on the previous ten years. This trend is also expected to increase, perhaps following in the steps of popular tea-time TV shows. The driving force behind the self-build explosion is probably the rising costs of buying a property coupled with an increasing awareness of the tax advantages of building a new house. Naturally the desire to have an individually designed home might have some small bearing too.

This growth in the self-build market has not gone unnoticed by the mortgage lenders either, and you can probably expect to see more marketing money being spent by some of the established lenders to ensure they maintain their market-share. Obviously the mortgage requirements for this type of project are vastly different from a standard residential mortgage. Specialist self-build mortgage lenders (and brokers) have created specific products to cater for the diverse needs of the self-builder.

Property development is carried out in stages, and the funding of a new-build house is carried out in the same way. The first stage is to secure the site, there are websites around that are devoted to marketing single building plots. Most self-builders will be on the look out for plots that are complete with planning permission and require only slight modifications to the plans and confirmation of building regulations. The construction of the house is then carried out in stages, with a funding structure designed to work around each completed phase.

The type of funding that is put in place for a self-build is dependant on whether the borrower/builder intends to occupy the property, rent it out or sell it. For true self-build projects where the borrower intends to live in the property there some quite incredible deals available, including up to 100% of all costs – which alleviates the need for the applicant to sell their existing property.

Where the self-build in more speculative in nature, such as buy to let, there is slightly less flexibility. However it should still be possible to get some very competitive loan-to-values.

One final thought, property owners with a lot of land are choosing to build new houses in the garden and split the title of the property in two. If you’re not too fussy about having acres of space it could be a useful way to top up an endowment or pension shortfall!

[tags]self build, property development finance[/tags]

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