The Advantages Of Getting A Self-Build Mortgage
With the spiraling cost of the UK housing market, more and more new homebuyers are looking at the alternative option of building their own home. If the idea of building your own home sounds romantic enough to you, the following are some of the advantage of such a scheme and how you go about arranging a self-build mortgage loan.
The advantages to building your own home
The advantages to arranging to build your own home, as opposed to buying an already completed home, are almost exclusively tax related. First off all, did you know that when you pay stamp duty on your new home you are actually only paying the stamp duty on the value of the land over GBP125,000? In other words, there is no stamp duty payable on either the completed home or on building the house. However, when you purchase a completed building the value and the land are seen as one. With a self-build home, this problem goes away, as you only purchase the land, the building is constructed at a later date. Depending where in the UK you want to build your house, you may well find this ends up saving you a significant amount of money. For example, if you buy land worth GBP 200,000 and build a house worth GBP300,000, the overall value of your new property would be GBP500,000; but you’ll only have had to pay the stamp duty on the GBP200,00 – not GBP500,000
The second major advantage of having a self-build home is in the cost. It is estimated that the cost of building your own home is about 2/3rds of the cost of buying a house that has already been completed. Add this together with the fact that you will not be required to pay stamp duty on building the house, and it is estimated that newly completed self-build homes are worth 30% more than the resale value from the day the house is completed. Given the high cost of UK housing at the moment, these seem to be significant advantages to helping you decide to build your own home!
Apart from all these, there is the added advantage that you get to help design the exact house specifications that you need or want!
How to apply for a self-build mortgage
Before you can apply for a self-build mortgage you need to find a vacant piece of land that you can buy. Once you have done this, you then need to go and talk with your bank and ask them for a home mortgage loan in exactly the same way as you would if you wanted to buy and new completed home. However, with a self-build home, you explain to your bank that you want to build the house yourself – although you will need to be careful here, as many lenders will not lend the money if you physically build the house yourself, you will need a qualified builder to do this for you.
Having done a credit rating score on you, your bank will then inform you of whether or not your self-build mortgage loan has been approved. Assuming it has, the process of how this is paid to will differ from that of a more traditional home loan mortgage. With a self-build mortgage, lenders generally pay the amount agreed to under the loan in installment payments, with the first installment being the purchase of the land, then the foundations, etc., until the mouse is completed. One thing you will need to be careful with here is to ask your bank whether or not each installment under the home loan will be paid to you at the start of a new phase or on completion of a phase. Given that you will need to pay this money to your builder to complete the project, this could have a significant impact on who you manage the construction of your new home.
Aside from that, provided you (or your builder) have arranged for all planning permissions required, you should be ready to go with your new self-build mortgage loan.
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