Rais­ing fi­nance

The Arran Banner - - Self Buid & Renovation -

While you prob­a­bly won’t want to make a for­mal mort­gage ap­pli­ca­tion be­fore you have iden­ti­fied a plot of land and es­ti­mated your build costs, it is im­por­tant to get fi­nan­cial ad­vice at an early stage to be con­fi­dent that you will be able to get a big enough mort­gage. Even if you don’t need a mort­gage to help you buy your plot, you should try to be sure that you get a mort­gage of­fer be­fore you com­mit to buy­ing a plot to avoid any nasty sur­prises later on.

Self-build mort­gage

You will need a spe­cific type of mort­gage for self-build be­cause a self-build mort­gage is nor­mally paid in in­stal­ments at cer­tain stages dur­ing the build­ing process and the lender needs to check progress at these stages to make sure it is sat­is­fied that the work has been car­ried out be­fore the next in­stal­ment of the mort­gage is paid out. Only some lenders of­fer self-build mort­gages so it may be eas­i­est to find a suit­able mort­gage by us­ing an in­de­pen­dent fi­nan­cial ad­viser (IFA) or mort­gage bro­ker, who will be able to find out what avail­able prod­ucts may be suit­able for you.

Nest egg

What­ever mort­gage you choose, you will be re­quired to pro­vide a sig­nif­i­cant de­posit to fund your build. In some cases at the mo­ment, lenders will not pro­vide any mort­gage fund­ing un­til your build reaches ‘wind and wa­ter­tight’ stage – ie, the main struc­ture of the build­ing is com­plete and weath­er­proofed (this is in or­der to re­duce the risk to the lender in case the project is aban­doned when the home is only part built). Lenders also gen­er­ally pay for each stage of the build in ar­rears – ie, once it is com­plete. If you don’t have enough sav­ings or other ways of bor­row­ing the money to fi­nance the pur­chase of the land and the ini­tial stages of the build, it may be pos­si­ble to get mort­gage fi­nance at an ear­lier stage. This can ei­ther be through a spe­cialised mort­gage prod­uct which pays in­stal­ments in ad­vance or in some cases you may be able to agree a form of bridg­ing loan with your cur­rent lender to fund the con­struc­tion phase, which al­lows you to take a stan­dard mort­gage when your home is com­plete. (Con­tains pub­lic sec­tor in­for­ma­tion li­censed un­der the Open Gov­ern­ment Li­cence v3.0.)

Fund­ing for croft homes

The Scot­tish Gov­ern­ment funded Croft House Grant (CHG) pro­vides grants of up to £38000 for the build­ing of a new house or the im­prove­ment or re­build­ing of an ex­ist­ing croft house. This sup­port is avail­able due to the par­tic­u­lar na­ture of croft­ing as a form of land ten­ure, the re­mote­ness of the land­scape and the chal­lenges faced by crofters in ac­cess­ing con­ven­tional forms of hous­ing fi­nance. In April 2016 a new scheme was launched which in­cluded in­creased grant rates, el­i­gi­bil­ity for owner oc­cu­pier crofters and in­creased ac­cess for crofters who pre­vi­ously de­crofted their house site. In ad­di­tion, a se­lec­tion mech­a­nism was in­tro­duced to al­low a pri­ori­ti­sa­tion for ap­pli­cants on lower in­comes, lower prop­erty as­sets and those who in­tend to max­imise the use of their crofts. The scheme has at­tracted a high level of in­ter­est since it was launched which has led to Scot­tish Gov­ern­ment al­lo­cat­ing an ad­di­tional £600000, rais­ing the to­tal bud­get to £2 mil­lion for 2017/18. Full de­tails of the scheme, ba­sic el­i­gi­bil­ity cri­te­ria and the se­lec­tion mech­a­nism can be found by vis­it­ing https://www.ru­ral­pay­ments.org/public­site/fu­tures/top­ics/ all-schemes/croft-house-grant-/ or call­ing RPID Tiree on 01879 220240.

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