Build your own home and save thousands
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The self-build mortgage market, like the mainstream mortgage market, has tightened in recent months as a result of the credit crunch and some lenders have disappeared.
Amber Homeloans, owned by Skipton Building Society, has closed, while Cheshire, Cambridge, Saffron Walden and Shepshed building societies have temporarily pulled out of the self-build market.
Others, such as Nottingham and Cumberland building societies will only lend in their local area.
But John Hay, at BuildStore, says funding is still available.
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Finding funding
Anyone contemplating a self-build project will need specialist financing. The good news is there are a range of providers willing to lend – and you can borrow up to 95% of the value of the land and the cost of the build.
Lenders who will still lend for self-build projects include Accord (owned by Yorkshire Building Society), Ecology, Norwich & Peterborough, and Skipton building societies, although Skipton’s loans are only offered through brokers.
Be prepared to pay a premium compared to a traditional mortgage for your loan. For example, Skipton Building Society has a self-build three-year tracker deal at Bank of England base rate plus 1.84% (current pay rate 6.84%), through brokers with a £799 fee.
This is available up to 95% of the land value and 95% of the build cost.
In contrast, a borrower purchasing property or remortgaging could get a lifetime tracker deal at 0.48% above base rate with HSBC (current pay rate of 5.48%) There is a £599 fee.
Rates are lower if borrowers don’t need to borrow such a high loan-to-value. Beverley Building Society has a three-year tracker with a current pay rate of 5.75% and a £995 fee for self-build if the borrower only needs to borrow 75% loan to value.
Like more common mortgages, borrowers can opt for fixed or variable rates.
