Self Build Mortgages
Building your own home can be a rewarding and perhaps life changing experience. If you have ever bought property in the past there has most likely been parts of that home that you were never happy with, often you spend years renovating and personalising your home possibly never having it exactly how you would like.
Building you own home enables you to choose options and personalise many aspects of design and build leaving you with an end product much closer to your dream home. If you don't have all funds to build your home readily available then you will need to consider a mortgage.
A Self Build Mortgage is a loan that can assist you with the cost of building your own home. It can help with the purchase of land, materials and cover the costs of architectural and building services.
The main difference between Self Build Mortgages and regular mortgages is that the money is released in stages during different tiers of the build. The first payment is to assist you with the purchase of the land, typically this would be an amount equal to 75% of the value of the land or the purchase price (which ever is lower).
The rest of the loan is then released at different stages of the build, these payments may be fixed or flexible depending on you're the mortgage provider; commonly there are five stage payments in total. There are two main types of self build mortgage, they differ in the way that the monies are released as the build progresses:
- Arrears Stage Payment Mortgage - If your mortgage is based on arrears stage payments then you will receive the money after each stage of the build is complete. It is not uncommon for the payments to be subject to a valuation, this means that a valuer will have to visit the site before money is paid. This kind of Self Build Mortgage can often lead to cash flow problems depending on your financial position.
- Advance Stage Payment Mortgage - As the name suggests the stage payments are released in advance before each stage of the build process. This type of Self Build Mortgage is becoming more and more popular. The reasons for the rise in popularity are probably that this mortgage leaves you in a positive financial position throughout the build; also these mortgages often have a higher percentage of lending. Advance Payment Mortgages usually lend up to 95% of the cost of the build compared to arrears type mortgages which generally only cover 75%.
When you are shopping for a Self Build Mortgage it is advisable to seek professional advice, you may wish to employ a mortgage broker to assist or you could go straight to a lender, either way you should compare rates from different lenders to ensure you get the best deal.
