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Mortgages

The ECB's flagship headquarters at Silsden

The ECB’s flagship headquarters at Silsden

Where self build mortgages differ from normal mortgages is that the mortgage can be supplied in stage payments to coincide with the completion of parts of the project. This allows the self builder to have ongoing finance while giving the lender some protection in case of failure of the project.

Generally the maximum mortgage available will be 3½ times a couple’s combined income or 4½ times an individual’s income

For 30 years the Ecology Building Society has actively campaigned for green building solutions and is ‘self builder friendly’. They have various ‘green’ conditions for obtaining a mortgage. It is fully mutual and growing steadily. It may be worth reading some of their case studies which cover new build, extensions and refurbishment.

To get impartial advice on mortgages try –

They charge a fee but at least you know they are unbiased.

Different lenders may vary slightly as to when they make the stage payments. There are usually between 4 and 6 stages available. See Buildstore’s Accelerator mortgage for an example of stages.

The stage payments are usually triggered by an inspection by a surveyor who issues a certificate which you send to the lender. Normally you have to pay the surveyor’s fees.

The problem comes if you run out of money between stages and are unable to complete the stage you are working on. At this point you may want to fall back on some type of short term finance. There are several possibilities –

  • you may be able to stretch your credit with suppliers
  • a bank loan
  • a bank overdraft (expensive)
  • a bridging loan with a bank may be an option (possibly expensive)
  • debit card (though once again, expensive)
  • loans from friends

If you have assets to sell then it is worth carefully planning at what point to do this. Particularly if you are selling your present house to fund the one you are building, it is important to be able to rely on getting enough money from it to keep the building process going on the new house. If the worst should come to the worst and you cannot afford to finish the house then remember that a shell which is wind and weather tight is worth considerably more than one which is nearly so. A prospective buyer can visualise finishing off the inside of a well built shell but may be nervous about taking on something which may be leaking or defective.

To find out the state of play with building societies Google here. They are constantly changing so there is no substitute for doing the legwork

 

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