It's generally much cheaper to build your own house than it is to buy one pre-built. The average cost of a self-build home is approximately ?150,000. The return on investment can be much greater too ? as soon as it's built you can expect an increase in value of 25-30% on what you paid to built it.
One of the major hurdles to overcome when considering a self-build project is obtaining the necessary finance. Some people opt to release equity from their existing mortgage, although this may not raise enough to fund the entire project ? it depends on the value of the property against the current mortgage on it.
If this isn't a feasible option, another possibility is to take out a second mortgage. Many lenders offer specially tailored self-build mortgage products. If you go down this route, you'll need to decide what to do with your existing property. Work out whether you can afford to have two mortgages on the go during the build, to enable you to live in your current house until the new one is ready ? or indeed whether there are any mortgage providers prepared to lend you a second mortgage. This can be a convenient way to finance the project, as it means you only have one house move, and mortgage repayments are often cheaper than renting.
If you can't afford two mortgages, the other options are to sell your current house and move into rented accommodation, stay with family or friends or even buy a mobile home or caravan to live on the building site. The latter may not be a suitable arrangement if you have a young family.
Self-build mortgages tend to have similar terms and conditions to conventional mortgages. You could have either repayment or interest only, and the interest rates available (fixed, capped, variable, etc) tend to be the same. The two main differences between self-build mortgages and conventional mortgages are that the maximum loan-to-value that will be provided is normally no more than 75% for self-build, as opposed to up to 95% or even 100% for a conventional domestic mortgage, and the funds are released in stages instead of all at once.
The way in which the funds are released depends on the provider. It's normally at key stages of the construction for example the laying of the foundations, when the building is wind and watertight, when the roof is complete, but some lenders release the funds upon completion of the stage, and others in advance. The issue with the former, arrears stage payments, is that the money is not available to fund the construction in advance, so it can cause cash flow problems. Some lenders offer advance stage payments, though, which makes it much easier to keep the cash flowing as the project progresses. Whichever way the lender operates, they will almost certainly want to send a surveyor or valuer to check on the progress of the build before they release each payment.
Sometimes up to a third of the cost of a self-build property is the purchase of the land. There isn't much spare land in the UK so prices are at a premium, particularly in popular built-up areas. Some lenders will be prepared to lend for land purchase, others won't, or will provide it as a separate loan, so be sure to check this out when doing your research.
Most lenders will want to see the architect's drawings and planning permission before agreeing to lend you any money, as well as a schedule of works ? some lenders will put a time limit on the build, often one year.
As well as being a cheaper way to buy a house, self-build has other financial advantages. The cost of building a new home is zero-rated for VAT purposes. You also won't be subject to capital gains tax on the capital you make from selling the property, and there's tax relief for financing the new build while remaining in the existing home. Many self-build projects are also exempt from stamp duty as this applies only to the purchase of the land ? unless the land price is over ?60,000.
If you're able to arrange funding to build your own home and are confident that you have the management skills to keep on top of the building work as it progresses, then self-build could be the ideal way for you to get the home of your dreams without it costing an arm and a leg.
Most of us take our homes for granted. We don't know how it was constructed, what was used or what the process for homebuilding entails. We just live in it, never paying any attention to the hard work and dedication supplied by all the builders and contractors in the months prior to closing. Well for those that are unaware of what is involved in building a house, this article will describe the very tedious, but very fascinating process in building a home through the eyes of a builder.
The Project Plan Building a reliable home requires a reliable builder with excellent project management skills. The project manager will develop a schedule of events that will take place over the course of 4-6 months, depending on the size and complexity of your new home. During the planning process, he will sit down with the customers to determine the specifications required in the home and factor that all into the project plan or schedule. Once specifications are determined, contractors are scheduled and materials are ordered. A certain order is required in building a house. For instance, the drywall needs to happen after all rough plumbing and electrical are completed and passed by inspections. Building a home does require a very meticulous order. Without this order, chaos can happen and contractors would be very annoyed with having other contractors in their way.
Risks and Constraints The builder also foresees any measurable risks or constraints prior to construction. A good builder will weigh these risks and constraints and mitigate them with a risk management plan. For example, the ground may be partial wetlands. In order to avoid building a shaky foundation, the builder chooses a foundation that will be sturdy enough for wetlands and will inform all parties involved of the risk so that all are aware. Communication is key in building a home and without it causes a nightmare to unfold. A possible constraint may be that a contractor will be out of town during the time he is required to to do work. In this case, the builder will either decide to wait for the contractor to return, causing a lag in the project plan while pushing out the closing date or he may just find another contractor. If he chooses the latter of the two, he risks losing the quality of work by placing trust in a new unfamiliar contractor, rather than his reliable one. Identifying these risks and constraints upfront will eliminate many future problems during construction.
Problems can Occur Of course, as with any plan, problems happen with home building. It is completely unavoidable. Whether it is not ordering enough materials, which causes a delay in the end date, or a contractor going against the specifications and not doing something the way a customer envisioned. These things happen continuously with homebuilding. If your builder is reliable and trustworthy, then your problems will be resolved as quickly as possible and everything will be communicated to you effectively. But be aware that with the amount of work involved in building a house, and the amount of resources required, problems WILL occur. The builder has much control over the process, but he cannot control everything and everyone involved in the process. If in your homebuilding process a situation should occur, trust in your builder that he will resolve the circumstances and that all will be ok in the end.
Building a dream home is an exciting adventure both for the builder and for the customer. The customer gets a wonderful home in the end and the builder gets a feeling of satisfaction after providing someone a beautiful, new and luxurious place to live. Just remember that when you select a builder, find someone that is reliable and trustworthy and someone who has excellent communication skills. It is extremely important that you feel comfortable picking up the phone and asking your builder a question. Without that comfort and trust, your dream home may not be such a dream in the end. But with communication, you will trust that any issue will be resolved and all your ideas and dreams will be met above and beyond your expectations.
Both Benedict Rohan & Chris Dicicco are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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