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.
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.
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.