Self Build Mortgages
With a self build mortgage, money is released in stages as the build progresses. Some lenders will lend you money to purchase land – typically 75% of the purchase price or value – whichever is lowest.
After this, the money for the build is released in stages. These stages can be fixed or flexible, depending on the lender, but usually there are six.
There are two methods by which the money can be released during the build – at the end of each stage (known as arrears stage payments) or at the start of each stage (advance stage payments).
With the arrears stage payment method, money is released after a valuer has visited the site and confirmed completion of the stage. This can cause some self-builders cash flow difficulties.
The advance stage payment method works in the opposite way, with money released at the beginning of a given stage, before work starts. This method has become popular as it provides positive cash flow during the build, making it easier to stay in your current house while the build progresses.
The stages of a build depend on whether or not you are building a traditional (brick and block house), a timber frame construction or if you are renovating or converting an existing property.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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Explore your mortgage options
Before you choose a specific deal, you need to decide what type of mortgage is the most appropriate for your needs.
People buying their first home often have specific needs when it comes to finding a mortgage. A range of mortgages exists specifically for this market sector.
With options for overpayment and payment ‘holidays’, a flexible mortgage can make the traditional 25-year British mortgage look rather old-fashioned.
These are mortgages suited to people building a new home. With a self build mortgage, money is released in stages as the build progresses.
Remortgaging means switching your mortgage to another deal with another lender without moving property.
Equity release can help people release cash (equity) in their homes for a particular purpose, like supplementing retirement income.
These types of mortgages are designed for property investors and private landlords, who do not intend to live in the purchased property but will let property to tenants.
A bridging loan is taken out to ‘bridge’ the gap between the purchase of a new property and the sale of an existing one.
The government has put in place a number of schemes to support house purchasers, such as Help to Buy.
An offset mortgage enables you to use your savings to reduce your mortgage balance and the interest you pay on it.
Second charge loans can be secured against residential or Buy to Let properties.