Is 2019 the year of self-build homes?

January 31st, 2019

The idea of building your dream home from scratch is an attractive proposition for potential home owners of all ages from all walks of life.

The number of self-build completions have risen every year for the past six years and with new mortgage products coming onto the market that trend is more than likely to continue in 2019.

What is a self-build home?

As it says on the tin, a self-build home is a property designed and built from scratch. Just imagine Grand Designs, but perhaps not always so grand. Many build the home of their dreams and it can often prove to be cheaper than buying on the established housing market. However, as the show Grand Designs highlights it is not always a dream process. The risk is much higher, costs can rise, projects can be delayed and sadly too many stories end with a visit to a lawyer.

But for many the positives outweigh the negatives and in 2018 self-build homes accounted for almost ten per cent of private new builds in the UK.

Lenders also consider renovations to an existing property, or conversions to a barn, basement, loft or garage as. In essence, any large extension could be classified as a self-build construction.

What are the challenges achieving finance for a self-build?

Lenders will only be willing to finance a self-build if it is a viable design. Most projects end up being fairly modest because lenders won’t fund wacky, out of this world this world and often unaffordable designs.

Mortgage applicants will need to have secured outline or full planning permission. They will also need a professional project manager, detailed costings and a builder that has been credit checked.

Mortgages for self-build tend to be interest only and will require sizeable deposits. It is also suggested that a specific insurance policy is taken out.

What mortgage products are currently available?

The most recent mortgage that has come on the market is offered by Saffron Building Society which has launched (22nd Jan 2019) a 3.99 per cent self-build mortgage.

The two-year, interest-only repayment product is available at a loan-to-value of 75 per cent, with a minimum and maximum loan of £30,000 and £1m respectively. The arrangement fee stands at 1 per cent.

The deal is also available to first-time buyers and has no maximum age restriction.
The building society stated all applications will be manually assessed by a specialist self-build underwriter, with up to five times income considered on applications. Custom-build developments will also be accepted.

What are the benefits of choosing self-build?

You get the home of your dreams is the obvious one. The Government have attempted to make the idea more attractive. In 2013 they introduced relief on the Community Infrastructure Levy (CIL) for homes built or commissioned by individuals planning to live in their home as owner-occupiers. The savings were significant as the charge typically added 10 to 15 per cent onto build costs.

The Housing Planning Act 2016 also puts a focus on self-builds, instructing local authorities to consider how they can support applicants and provide land.

The UK lags behind other European countries where self-build homes account for around 50 per cent of new properties. There is plenty of potential growth for the UK and with other areas of the housing market slowing down, this sector could buck the trend.

  • If you are looking for a mortgage it is always best to talk through your options with an advisor. Contact our experienced team on 01908 465100. We are a fee free mortgage based with offices in Milton Keynes and London.