Anyone who has set about looking for a new home to buy knows how difficult it can be to find everything you’re looking for in an existing property. But if you can build your home from scratch you can dictate the structure from the start. Rebekah Commane looks at how to go about creating a self-build home
Self-build homes are becoming an increasingly viable option for first-time buyers and home movers alike. You may choose to convert an old building into a dream dwelling or start with a completely blank canvas but where do you start?
Firstly, you need to establish what type of self-build project you are aiming for. There are three different types to consider; a self-built one-off home, a contractor built one-off home or a developer built one-off home.
It’s the law
You must remember that there are many legal aspects to consider in building your own property and to factor any expenses this might involve into your budget.
Paul Winter, chief executive of Ipswich Building Society, a provider of self-build mortgages, offers some advice to What Mortgage readers on the legalities of self-build.
“It is important to carry out checks on the plot of land before purchase, such as conducting searches to check the ownership of the plot of land you are considering and any rights of way or other issues that may affect it. For instance, is there any other development planned for surrounding land or is there a ‘ransom strip’? This is the term for an adjacent area to your plot that must be crossed to access the land or to run services. You don’t want to end up paying out an exorbitant amount to the owner of this land, just to reach your property.”
When considering demolishing or altering a listed building, there are further legalities to bear in mind. You will need listed building consent and restrictions on the type of build will apply in some areas.
Borrowers should have submitted working drawings for Building Regulation design approval with either the local authority or an approved inspector.
Titles should be checked by the conveyancer as would be the case for a traditional purchase. Special attention should be paid to rights of way and any other restrictive covenants with adequate cover being in place.
Finance
When it comes to financing a self-build project, not all lenders will provide mortgages so do your research.
Currently 24 building societies such as Ipswich, Norwich and Peterborough, Saffron and Leeds provide loans for self-build as do a number of banks and specialist brokers like Buildstore.
You will need to provide a professional estimate of how much the project will cost.
According to Winter, you can borrow up to 75 per cent of the value of the land you are building on and you can borrow the same percentage of the cost of the build. If you already own the land outright you can borrow against it, meaning you can take out a larger loan if you wish.
The amount of deposit required as well as the rates you will pay and the terms you will need to meet will all depend on the lender, the planning permission you have acquired and the type of building you are looking to finance.
Winter says: “Effectively, 25 per cent of the cost or value of the land will be needed as a deposit. You will then need sufficient funds to progress the build and, at appropriate stages, the lender will release further monies to enable the build to progress.”
Various elements of your income and expenditure will be taken into account, as with any standard mortgage application.
For those with an existing mortgage but looking to take out a loan for a self-build project it is more difficult to secure finance. As self-build mortgages are paid in stages, lenders will need to ensure that the borrower can afford the payments on the second mortgage as well as the first.
Speak to a variety of lenders as there are a number of self-build products available and what can be offered depends on the individual case. Many lenders will look at projects on a case-by-case basis so it’s a good idea to shop around.
Lenders will generally release the funds in stages and will want to inspect each phase as it is completed and before the next instalment is granted.
The lender will also want to ensure that the project is viable. You need to be realistic in what you want to build and can afford; while the custom-built homes on Grand Designs are surely great feats of architecture, most of them would realistically be far out of the budget of the majority.
Your initial mortgage rate may be higher for self-build but once it is complete, and has been signed off by the lender, it may be possible to remortgage to a better rate.
Warranty
The warranty provider will check that the design and workmanship is acceptable throughout the construction process, through a series of site inspections or technical audit checks (this can incorporate the Building Control functionality if it’s been arranged via the warranty provider).
There are a number of warranty providers in the market but four of the main providers are NHBC, Build-Zone, LABC and Premier Guarantee.
Self-builders will require a variety of insurance policies, depending on the method of acquiring their build. They should have site insurance, which normally covers loss or damage to the building works, temporary works and materials for incorporation therein (and existing structures in respect of conversion projects); public liability; employer’s liability, together with personal accident; JCT (Joint Contracts Tribunal) clause 21.2.1 insurance, to cover possible damage to the surrounding area.
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