Whichlenderswillhelpyou build yourown home?
We have recently helped a client to fund the conversion of a 18th century barn in North Yorkshire into a main residence with the help of a self-build mortgage. Here is a useful Q&A for those who may need a mortgage for a self-build or conversion project.
While in many ways it’s like any normal house purchase, there are a number of additional things to consider.
Many lenders will advance the money in stages, but you will need some form of deposit at the outset. There are lenders in the marketplace who will fund up to 85 per cent of the cost of each stage of the build and typically on a barn conversion there would be four or five stages to consider. These would include purchase of the property, structural overhaul, structural walls floor and roof, first fix and plastering and, finally, second fix to completion.
If you are planning on taking on the building work yourself, be prepared to provide proof to your lender that you have experience in building projects and if you appoint a contractor, be sure to request examples of projects they have completed so you and the lender can assess the quality of the workmanship.
As a general rule, it is the smaller or more bespoke lenders that will fund barn conversions and a benefit of this is that each project can be considered on its own merits rather than the lender taking a tick box approach to assessing your project.
It is vital to have a clear budget in mind and a strong hold of both costings and timescales as lenders like organisation and clear plans.
A mortgage adviser will be able to guide you in the right direction and will also have an understanding of the specialist products in the marketplace that may apply to your project.
For example, the Ecology Building Society based in West Yorkshire has a scheme that assesses the interest rate based on the energy efficiency of your property, which may work for your project.
It is likely that during the build period we will be able to arrange funding on an interestonly basis to minimise monthly expenditure but it is also vital to understand what your mortgage will look like on completion when we turn it back to a repayment loan.
During the renovation process, do not expect the interest rate to be market leading. This is more about getting a facility to enable the project to go ahead so even given current rates, it is likely that a self-build mortgage will be priced accordingly.
Do not forget about fees either as many lenders will want a say in the specialist individuals or companies who are appointed, whether they are architects, quantity surveyors or project managers and do not forget, they will all need paying.
It is vital to have a clear detailed plan. For example, where are you going to live while the conversion takes place? Are you putting a static caravan on the site or will you remain in your current main residence? While both of these are feasible, they could impact on your borrowing capacity significantly given the relative costs.
You must also consider how much land the property has with it and whether this land has any agricultural restrictions. Where does the water come from and where does the waste water go? Is the property in a National Park and is it on the national grid for power? Crucially, these days, does it have access to a good wi-fi connection?