Expert discusses the ins and outs
In the midst of upheaval in the mortgage market, a growing number of individuals are exploring alternative paths, including self-builds, but understanding the financial aspect is crucial.
So, how can someone enhance their knowledge on the self-build market and how can the sector expand?
Tony Hall (pictured), head of business development at Saffron for Intermediaries, said the process of self-building is nuanced, and having a reliable guide is indispensable.
“One notable resource is the National Custom and Self-Build Association (NaCSBA), which serves as a treasure trove of information for both brokers and consumers,” he said.
Brokers, in particular, can benefit significantly from exploring these avenues, Hall said, as there is plethora of reference materials available through NaCSBA. These resources act as a guide, he added, shedding light on crucial aspects such as costings, plans, location considerations, and the resale ability of the property.
Securing a self-build mortgage involves a higher level of intricacy compared to a standard residential mortgage. Hall said it is advisable to engage a knowledgeable mortgage broker or intermediary for guidance.
“These experts play a crucial role in navigating options, ensuring not only favourable rates but also identifying lenders compatible with the construction approach,” he said.
Moreover, Hall explained, they assist in comprehending the cash flow dynamics, given that mortgage funds are often disbursed in stages, either in advance or retrospectively.
“Lenders vary in their fund release structures, and a skilled broker can help tailor the approach to the self-builder's needs,” Hall added.
Brokers can also support their self-build clients by advising on bridging loans and helping them to secure one.
Bridging loans, swift but costly short-term financing, typically require a prompt arrangement, Hall emphasised.
“Approval hinges on a solid 'exit strategy,' often involving property sale or refinancing to a standard mortgage; secured against your property, these loans pose a risk, necessitating caution,” he said.
Meeting construction deadlines, Hall noted, is crucial to avoid additional expenses, making the process even more time-sensitive.
Another option brokers could support their self-build clients with is a Help to Build equity loan; similar to Help to Buy, the government initiative aids individuals in crafting their own homes.
Help to Build, Hall said, caters to those with modest budgets, expanding the self-build option, with a cap of £600,000 for the new home, inclusive of land costs, if not owned, and a maximum of £400,000 for construction expenses.
Hall said despite the prevailing challenges in today's housing market, including concerns about insufficient housing supply and the environmental impact of modern construction methods, self-build and custom-build projects stand out as viable and promising options.
“We have noticed a shifting trend, with even first-time brokers venturing into the realm of self-build projects, indicating a changing perception and growing interest in this market,” he said.
While legislative measures such as the Help to Build and Right to Build, along with local authority planning reforms, are steps in the right direction, Hall said, there is a consensus that more government focus is needed.
“Building your own home is a practical and achievable opportunity, and we believe a concerted effort from the government to promote awareness and understanding of this option would further enhance its viability,” Hall concluded.
How important do you believe the self-build market will be moving forward? Let us know in the comment section below.
