Self Build Mortgages
With a self build mortgage, money is released in stages as the build progresses. Some lenders will lend you money to purchase land – typically 75% of the purchase price or value (whichever is lowest).
After this, the money for the build is released in stages. These stages can be fixed or flexible, depending on the lender, but usually there are five (see table below).
There are two methods by which the money can be released during the build – at the end of each stage (known as arrears stage payments) or at the start of each stage (advance stage payments).
With the arrears stage payment method, money is released after a valuer has visited the site and confirmed completion of the stage. This can cause some self-builders cash flow difficulties.
The advance stage payment method works in the opposite way, with money released at the beginning of a given stage, before work starts. This method has become popular as it provides positive cash flow during the build, making it easier to stay in your current house while the build progresses.
The stages of a build depend on whether or not you are building a traditional (brick and block house), a timber frame construction or if you are renovating or converting an existing property.
The following table provides an indication of the typical stages:
|Stage||Brick & Block||Timber Frame||Renovation/Conversion|
|1||Purchase of land||Purchase of land||Purchase of the property|
|2||Preliminary costs & foundations||Preliminary costs & foundations||Preliminary costs and structural overhaul|
|3||Wall plate level||Timber frame kit erected||Wind & watertight|
|4||Wind & watertight||Wind & watertight||Plastering & services|
|5||First fix & plastering||First fix & plastering||Second fix|
|6||Second fix to completion||Second fix to completion||To completion|