How to finance your custom or self-build project
There is much uncertainty among banks and building societies about the difference between custom and self-build which can make it difficult to obtain finance for your project.
However with the custom and self-build market predicted to grow by 41% by 2020, according to The Self and Custom Build Marker Report, the message is starting to get through to banks and building societies. Virgin Money recently announced they are now offering custom build loans with 85% loan to value, which should help towards providing the much needed help to get custom build projects off the ground.
If you are struggling to know where to start on financing your custom build project here is a quick overview of the options available to you.
Unless you are fortunate enough to be in a position to pay for your project outright or have a very generous family member who can loan you the money, you will most likely need to look to banks and building societies for a dedicated custom build mortgage.
You may be wondering what the difference is between a custom build and a standard mortgage and where you go about getting one. We have covered the basics below to help you know where to get started.
What is a custom build mortgage?
Custom and self-build mortgages are seen by lenders as carrying more risk as such they differ from standard mortgages in the following ways:
- Involve stage payments relating to set stages of the build
- This can be either at the end of stage, known as an arrears self-build mortgage or at the start of each stage, known as an advance self-build mortgage
- Interest rates are usually higher and may incur a penalty charge for early repayment
- Lenders will usually want to see detailed plans and a projection of costs
- The amount of deposit required is also higher, typically 25% but sometimes up to 50%
Where can I get a custom build mortgage?
There are several lenders that offer custom/self-build mortgages with two main products on offer; an arrears self-build mortgage, where payments are received at the end of the building stage or an advanced self-build mortgage, where payments are given at the start of the set stage.
Here is a list of the main providers:
- Bath Building Society
- Buckinghamshire Building Society
- Chorley Building Society
- Cumberland Building Society
- Darlington Building Society
- Dudley Building Society
- Ecology Building Society
- Furness Building Society
- Hanley Building Society
- Hinckley & Rugby Building Society
- Holmesdale Building Society
- Ipswich Building Society
- Loughborough Building Society
- Mansfield Building Society
- Melton Mobray
- Newbury Building Society
- Newcastle Building Society
- Nottingham Building Society
- Penrith Building Society
- Progressive Building Society
- Scottish Building Society
- Stafford Railway Building Society
- Vernon Building Society
What other funding is available for custom builds?
In 2016 the Homes and Communities Agency launched the Home Building Fund which is available to custom builders to help towards the development costs of the build.
Check out our article on The Home Building Fund for more information.
Hopefully this information has helped give you the foundations for embarking upon your custom build project. Good luck!
By Anna Symington