Self-build mortgage – Building your own home? A self-build mortgage may be for you
For those brave enough to take on building their own home, a self-build mortgage can provide some much-needed financial help. Whether you’re having professionals do the work or you’re building it yourself, unless you have enough cash already to see the project through to completion, you’ll probably need this specific mortgage for funding the build itself and/or purchasing the land you’re building on.
A self-build mortgage differs from other mortgages in that the funds are released bit by bit over time rather than at once. This way, the mortgage and its payments follows the progress of the building work taking place. At regular intervals a valuer will come and visit the site to see if everything is on track. Once this is done, the next proportion of funds is released. Although you won’t pay stamp duty on your completed property, self-build mortgages tend to have higher interest rates than standard mortgages.
Be prepared as well for more paperwork with a self-build mortgage application. In addition, lenders can ask for a higher deposit, perhaps up to 50%, although around 25% is more typical. There are more costs as well to take into account, such as paying for the repeated visits done by the valuer, and you’ll also need to have detailed plans for your completed property to show to the mortgage lender.
You don’t have to go to a specialist lender to get a self-build mortgage; many mainstream lenders offer them. With what can sometimes be a complicated process, it can be wise to use the services of a mortgage broker or independent financial advisor for applying for a self-build mortgage.
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