Solid financial foundations for your self build

BuildStore finance expert, Rachel Pyne, explains what you should consider when funding your project – and how to avoid some of the common financial pitfalls
by BuildStore Mortgage Services
28th February 2019

On any home building project there’s never a day without bills – and you’ll need cash available to pay them or you’ll quickly run into problems. So arranging the right type of finance is essential to enjoying a successful self build. Here’s what you need to know to find the best solution for you.

Budgets & cashflow

The lowest rate, minimal fees and the total loan amount may be uppermost in your mind when searching for a mortgage for a house purchase. But when it comes to self build, the single most important factor is cashflow: in other words, ensuring sufficient funds are available at the right time during your build.

This is specialist lending and an area where few lenders or mortgage intermediaries have any in-depth knowledge – they may receive one or two enquiries of this kind a year.

With so many factors that can affect your cashflow (construction type, design, ground conditions etc) it makes sense to consult an expert with in-depth knowledge not only of self build mortgages, but also construction. There really is no substitute for experience when it comes to arranging this type of funding!

For instance, BuildStore’s team of qualified project managers can thoroughly check your costings to ensure your property can be completed to your budget. We will then prepare a tailored cashflow for you that forms your payment schedule, so that you know you have the necessary funds available at each stage of your self build, and there are no nasty surprises.

Keep your mortgage options open

By consulting a specialist mortgage adviser you will gain access to a wide range of lenders and products, and they can confidently recommend the mortgage best suited to your individual circumstances and project requirements.

I’d recommend discussing your ideas with a specialist early on because by choosing certain design elements before discussing your finance, you may unwittingly be limiting your choice of lenders and products.

Be aware that if you approach lenders directly, they will only offer a very limited product range that may not be best suited to your requirements. My advice is to keep your options as wide as possible and deal with an expert who can match you with the best product for your project.

“It’s easy to arrange finance, it’s whether it’s right that counts”

BuildStore has developed around 70% of all of the mortgage products for self build homes in the UK, with a panel of around 20 lenders. You’ll find features such as higher lending percentages – up to 95% of your projects costs, or 100% if you already own your plot – unique advance stage payments, and interest only during your build.

If you prefer to deal with your own mortgage broker, they can tap into our exclusive mortgages using BuildLoan for Intermediaries, and receive expert guidance and support for your project from our broker desk.

Be wary of unscrupulous brokers

Always be wary of brokers who charge significant upfront fees before a mortgage agreement in principle is even issued. We are aware of one broker charging £1,000 without any guarantee of a mortgage offer. My advice is to walk away if you are going to be charged upfront for advice.

Don’t get shoehorned into the wrong product

You’re building a bespoke home and, just as no two projects are the same, there’s no one-size-fits-all solution. Every project is completely unique and requires made-to-measure finance.

Self build mortgages release funds in stages – either in arrears or in advance. The right option for you will depend on a range of factors.

For example, if you want to use an offsite manufactured building system like timber frame, it’s likely that your supplier will require full payment before your structure is delivered onsite. BuildStore can tailor your funding to suit your payment terms and your project costs.

It’s easy to arrange finance, it’s whether it’s right that counts.

Take a long-term view

Look to work with a broker who will be with you from start to finish, offering support and guidance from initial advice, through your build and beyond to facilitate your mortgage releases and ensure a quick switch onto a traditional mortgage when your build is complete.

Rachel Pyne is client services director at BuildStore. BuildStore Mortgage Services has helped 25,000 customers successfully build, renovate and convert their own homes during the past 20 years. For more information and expert advice on how to finance your self build visit the BuildStore website.

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