Self-Build Mortgages

If you’re looking to build your own home then a self-build mortgage is for you. The main difference between a self-build mortgage and a standard residential mortgage is that the money is given in stages as main parts of the build are completed. Also, building your home using a self-build mortgage can save you thousands in stamp duty, with only the plot of land accruing stamp duty once it costs in excess of £125,000. With this type of mortgage, expect to pay a large deposit, as most lenders will only lend up to 75% of the plot value and 60% of the build cost.

Rates on self-build mortgages tend to be higher than standard mortgages and there is some variation in the types available.

Types of self-build mortgages

  • A fixed-rate mortgage gives fixed monthly payments for, typically, between 2-5 years, depending on your circumstances and agreement with the lender. You will benefit if the interest rate rises, but not if it falls. This type of mortgage is often better for first-time buyers as it offers more security.
  • A tracker mortgage is aligned with a base rate, typically the Bank of England’s base rate, plus a pre-agreed mark-up. Your payments will rise and fall in line with this base rate. Those looking to remortgage from a fixed rate to a variable or tracker may benefit from better rates, but will have less security.
  • Release of funds (in advance or post-construction stage) will depend on your savings before you start your dream home project. If you do not have the cash in advance for contractors and materials, it’s best to choose a self-build mortgage where the lender will release the funds in advance of each stage of the build. Whereas if you have saved and budgeted in advance, post-construction payment may be the best option for you.
  • A renovation mortgage can be used to renovate or convert a property as opposed to building brand new from the ground up. This is because it can be extremely difficult to get a standard mortgage on a dilapidated property.
  • Custom-build mortgages involve buying a plot of land from a developer and then choosing from a prerequisite of options from that developer’s catalogue. Some developers will already have agreements in place with a lender, but you don’t have to use these.

Applying for a self-build mortgage can be a long process. As well as undergoing affordability checks, you will be expected to provide detailed plans of the property, cost projections and planning permission.

Your property may be repossessed if you do not keep up repayments on your mortgage.
This firm usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.

Why Aston & Co?

At Aston & Co we have the experience and the know-how to help you find the best self-build
mortgage deal to suit you and your budget. Our friendly and professional advisors are on hand to guide and support you in your choices. Contact us today to discuss your needs and pave the way to your happy-ever-after.

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