Self Build Mortgage

A self build mortgage is for people who want to build their own home rather than buying a home. Although you may think this is very costly, getting a self build mortgage can potentially make the home owner a big profit because upon completion a self built house will usually be worth a lot more money than it cost to construct it. If you have a good understanding of what goes into building a house, both in terms of the legal requirements and the needs of construction, then you can save a lot of money because you won't have to lavish out on legal fees and a huge team of people.

Someone who is completely new to the idea of building a house will have to pay for people who have the knowhow to construct a self built home. If you are financially comfortable enough, this might not be a problem for you but be sure to research the subject thoroughly before you think about getting a self build mortgage. Irrespective of how knowledgeable you are of property construction, there are some big differences between a self build mortgage and a standard residential mortgage that you should be aware of when getting out this type of mortgage.

A Self Built Home

Self build mortgages are a lot more complicated than normal mortgages because of the legal requirements involved. Firstly there are a few more boxes you need to tick with a self build mortgage. You will need to own a piece of land to build your home on before you even think about building and then you need to jump through a range of legal and regulatory hoops.

Planning permission is the first and usually the biggest hoop you will have to go through. Being granted planning permission can be a long and tiresome process as there are many reasons why you could be rejected. If you plan to construct your house in a rural area of England, it is likely that the local community are going to want to know what kind of house you want to construct. Rural villages of England can be particularly funny about a house or building being constructed which alters the character of an area.

So if your architecture tastes are a little bit edgy a local council may get pressure to reject your planning permission from the local population. If you get past the hurdle of planning permission you then have the large logistical operation of actually putting the house together. A house that you build from scratch can costs huge amounts of money due to having to pay builders, planners and anyone else you think of that is needed.

Money Is Released In Instalments

The money you get from a self build mortgage will help you get past these hurdles. Unlike money from a normal mortgage which is given to you in one big pay out, money from a self build mortgage is released to you in instalments. These instalments are released during a certain period of your home's development. So at the start a certain amount of money will be released so you can start to put motions to place to get the house self built, such as buying land and paying for consultants to help you get planning permission.

Once you have got the land and the planning permission, you will then have to hire people to start building the house. The money from this will come from another instalment of the self build mortgage. Once you have the workers you need to build the house, you will need the money to pay for all your raw materials such as bricks, cement, wood and anything else you can think of that is included in a house. This should all be paid for by another money instalment being released from your mortgage.

Repayments on Mortgages

The way lenders assess you when you are applying for a mortgage that is going toward a self built home is also different than they way they assess those applying for residential mortgages. The credit checks you are subjected to when you are getting a loan out to build your own home are going to be harsher due to the amount of money that is being borrowed. You are also likely to get a higher interest rate than you would get on a normal mortgage. This is because residential, commercial and investment mortgages are in more demand and a self build mortgage is in quite a niche market, so providers can get away with charging high interest rates. If you are aware of these differences but are still happy to go for it then start comparing deals as soon as possible and soon enough you should be granted a loan.