Self Build mortgage demand to grow

Self-Build mortgage demand to grow in the next few years

Figures from Datamonitor, a world-leading provider of premium global business information, predict a 141% growth in self build mortgage lending in the UK in the next three years.

Contact A Mortgage NowThis would take a market currently worth 790m to nearly 2 billion by 2015. This growth is expected due to Government initiatives in the housing market, particularly the easing of planning rules.

In a flat housing market, any growth is to be welcomed, and self- build is an interesting area covering new constructions, and renovations or conversions.

This market appeals to the more adventurous purchaser, offering the potential to secure a high value property for relatively modest investment.

The option to ‘design your own home’ is clearly an attractive one and is common in many other countries in Europe, Australasia, and North America.

Self-Build potential in the UK is hampered by the lack of mortgage lending available – there are very few Self-Build Lenders among the UK Banks and Building Societies. This is likely to change as market demand grows – smaller Lenders in particular are always looking for niche areas in which to operate without having to complete with the major banking institutions.

How a Self-Build mortgage works

A self-build mortgage lender will typically provide funds for acquisition of the land to be built on, or property to be refurbished or converted. Further funds are then released in stages to help fund the building work.

You should expect to purchase with planning permission in place in order to make the property suitable security for the Lender.

Lenders will need to see plans and costings, which should include the expected final value of the completed project – it is this figure that the Lender will use to assess maximum lending.

As a borrower you should expect to have your own funds to act as deposit and assist with build costs – a minimum of 25% of the acquisition price in the first instance.

Do not expect the pay rate on your Self-Build mortgage to match the more competitive mainstream mortgage market. There is considerable extra cost and risk for the Lender and that is reflected in the mortgage pricing.

Self-Build Planning

Make sure you budget correctly and allow for contingencies. If you run short of funds, additional lending is not always possible. Similarly, allow enough time for the build, and measure out your cash-flow carefully. If you do not have building experience, consider using a project manager as it could save you money and stress.

Lenders will tend to advance money in stages so make sure you have enough cash to cover each period. Some Lender will advance funds ‘in advance’ of each stage, and this can be advantageous.

Arranging a Self-Build mortgage

If you need a mortgage for a self-build project do not waste time on comparison websites or approaching Lenders direct. You need the assistance of an Independent Mortgage Broker, and one that is used to handling Self-Build cases. You can expect that the broker will charge you a fee as there is considerably more work involved for the Mortgage Broker in a Self-Build mortgage than in a standard mortgage case.

For more help or information on Self-Build Mortgages – contact us now.

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