Want to build your own home in the country and wondering about how to finance it?
We have put some questions to Tim Leonard of Mortgage and Financial Guidance Ltd
Q: Can you borrow from a bank to purchase the initial site?
A: It may be possible to borrow up to 60% of the land purchase price. However it is more typical for lending to be released once the build is underway.
Q: Many people fund a site purchase from the sale of their current house and then either have to rent while a house is built or live in a mobile home on site. How does the bank finance work once the build has begun?
A: The total borrowing on a self-build is determined by the final market valuation of the property once completed. A lenders valuer will make an assessment of this potential value prior to agreeing the mortgage as part of their assessment. The maximum amount of lending is based on 75% of the value at each stage of the build.
These stages are normally as follows;
Build to wall plate level, Wind and watertight, 1st fix (initial wiring and plumbing in place), Full completion (Completion certification required to release final balance) Although some lenders permit an additional release at foundation level.
Q: Is the rate higher for a new build mortgage and if so, how long do I have to sign up to the higher rate for?
A: The mortgage rates for a self build are typically higher than a standard mortgage but the difference isn’t large.
Self build initial rates typically run for 2 or 3 years from the date of the initial advance. Once the property is full completed (completion certificate) and you are out with your early redemption penalty you can move to a standard mortgage rate with the lender you have borrowed from or from within the wider market.
If you would like any advice in relation to a mortgage, Pooler Country recommend Tim Leonard of Mortgage and Financial Guidance Ltd. He can be contacted at 028 9094 1628 0r 07731 776650