Mortgages can be complex enough as it is, so throw in a house that doesn’t exist yet and it can feel that much more complicated – but it doesn’t have to be. Mortgages for self-build projects, whether that’s building from scratch or doing large scale renovations, are becoming more accessible and part of the everyday norm.
We caught up with one of Hanley Economics Mortgage Advisers, Jane Longmore, to chat about her thoughts on mortgages for Self-Build projects…
Q: What are the big differences with a self-build mortgage compared to a classic mortgage I could get with any lender?
A: Well a key difference is, a self-build mortgage is a mortgage for a house that isn’t there yet so things have to be done a little differently!
Stage payments are the biggest difference. With a traditional mortgage for a house, it’s a straightforward transaction but as you are building a home – the mortgage is released in stages. This specialist kind of mortgage is more structured, which means a little more control whilst the build is taking place.
The application process is also different, simply because of the complexity. So as a lender, we need to see you plans and offer advice around your budget – it simply takes a little more time but it’s worth it if you can build your dream home!
Q: What do you think are the key highlights of a self-build mortgage?
A: Well we’ve talked about staged payments, it allows you the freedom of not paying as much interest as opposed to a loan as you only pay interest on the money once it has been released. What’s even better is a key feature with Hanley Economic is we can offer interest-only payments for up to 2 years – this means you are encouraging your outgoings to be as low as possible, as well as having that extra surplus.
These payments are also budgeted with your build, so it doesn’t have to be the same amount at every stage. The earlier period of building your home may be more costly than later down the line, that’s fine as we can work around that!
Q: Do you think self-build mortgages will change much in the future?
A: Yes because self-builders are changing! We are seeing less traditional builds, more eco-friendly aspects are being brought into everyday life around the home so lenders will need to change and adapt as we learn more.
From my point of view, it seems to be becoming more popular to build from the ground up over doing a renovation project as you can see more relaxed planning rules in some areas.
People are also taking advantage of changes to their work/life balance, they don’t need to necessarily live in a city or large town to work now – they can commute much easier or work from home so of course people want to get out in to the countryside a little more!
Q: So have you got any top-tips for aspiring self-builders?
A: Be realistic with your finances, and stay realistic. It sounds very easy but, it’s harder than it seems! It’s easy to run away with adding something here, spending a bit more money on your kitchen there…
I (and my colleagues!) work with customers to make sure costings are realistic and it’s your home that is being built, so we know that you may want a certain style of kitchen or a swish bathroom – but we make sure you have budgeted for that before you start the build.
It’s also a good idea to have a contingency plan – we always recommended around 10-15% because it would be a miracle if nothing popped up unexpectedly! It’s the classic saying, take care of the pennies and the pounds will look after themselves.
Q: What other resources would you recommend for self-builders applying for a mortgage with us?
Well we have some resources available on our website which may help those in the researching stage.
Our ‘self-build lending guide’ talks through lots of different subjects from warranty providers to types of property we can lend on so is really useful to read through – it’s always the first thing we offer to people at Self-Build shows!
We also have a costings form which is a tool you can use to calculate costs and is a really handy reminder of what you need to think about at each stage.
There is also an ‘Application Check List’ which does what it says on the tin, but it’s always good to know what you need ready to make your application.