Cant Afford a House ? Is Self Build the answer ?
Here is why this might be the solution you are looking for.
Working part time these days as I do for my Financial Services Company PAS Financial and Mortgage Solutions Ltd, because unlike the mantra the banks are lending they are not as much as they would like you to think they are. Sorry to disappoint but the truth is the truth my rant now over.
I was asked by a client today to explain how they might prepare for a self build property and purchase a piece of land as an alternative to the purchase of rather expensive and overrated properties they had looked at for the past month in Scotland near to Scotland rich oil and Gas fields.
As I worked through this with them apart for the chronic lack of sensible and creative lending that isn't taking place, even in this arena, and despite the husband being a very good lending prospect, as a higher rate taxpayer with a good history and still fairly young too, there is still a chronic shortage of willing and available lenders even considering the proposal.
Despite the lending restrictions,which isn't my clients fault the option is very viable for them to save a considerable amount of money and it could feasibly be a real go project for them.. So on that basis I though I might try to explain in simple term show its possible for an ordinary couple looking into this to start to consider the same option an alternative to purchase the standard way. So they are seeking to embark on what we call self build do it your self build a House basically. Although its wide to factor in professional builders and or project management.
Lending works like this.
Firstly the Mortgage lending would work in the same way as a traditional mortgage except you will at outset be underwritten for a full amount say £200,000 in our example. Now suppose you can find a clear piece of land very important point here is that when sourcing a piece of land for the new home to be built on then make sure its free of all buildings not even a broken shed to remaining.
Consider Finance
Now for Scotland at present a 75% mortgage facility would be provided subject to survey, in England and Wales its possible to raise up to 80% maybe higher in certain conditions. Lending conditions for the Land purchase meaning the client must find the 25% Deposit. So in the case of our example a piece of suitable land purchased at £100,000 could then be mortgaged for £75,000 in Scotland £80,000 in England and Wales.
There are four stages to the building and development. Some may run 5 but in essence these stages are the key basis of project managing each stage allowing for the drawdown of the lending and ensuring contractors payments are made in arrears after each completed stage. After all you as the client will have been underwritten for the full borrowing requirement and the contractor is secure in knowing as a professional skilled workman they will be paid for their work saftley as finance is available
A win win situation in this climate for both parties. As with all projects its all about managing the cashflow and building in contingencies, including whats expected of who and by when and how much the key questions that need to be answered on a day to day week to week basis. Many projects fail because common sense doesnt prevail essential questions havent been thought of or answered and nobody knows whats expected of them by when.
So the Four Key Stages to be Managed
- Foundation -Stage
- Timber Frame construction or Frame construction
- Utility Stage Electrical Gas Water Sewage
- Final completion Habitation Landscaping Habitation Certificate
At each stage the lender will re assess the completed work at each stage and advance 75% of the uplifted value. So in our example a piece of land with proper foundations dug may increase from £100,000 to £120,000 meaning potentially the client has the ability to draw down a further £15,000 or £16,000 depending on the loan to vale agreed with lender at outset providing the finance for the completed work and allowing for payment to the contractor
It works the same way through to completion using this 75% or 80% advance means to finance the development at each stage.
The obvious key advantages are the
- Reduction of overall House Purchase Costs
- Better say and control of your final House Home requirements
Disadvantages
- Will require confidence in some form of Project management
- Manage Cashflow or it could be a potential disaster
Overall its a very positive outcome for the Homeowner very satisfying rewarding and cost effective if done properly
As a licenced Credit Broker and properly authorised Brokers we are able to advise and assist with Mortgages Finance or provide written quotations subject to status and Lenders terms
For more information please email
paulstacey@finance-solutions.freeserve.co.uk
For guidance and advice or for further information please call me back on
Paul Stacey.
Tel 01306 881399
Mobile 07710-854040
Details below
