Managing Your Self-Build Budget

Plot Your Cashflow
Take Charge Of Your Project

Viewers of Grand Designs and Property Ladder will be all too familiar with developments that add up on paper but whose budgets spiral out of all control during the actual build. Follow our advice to ensure your costs are controlled...

When putting together a budget for a self build project, the most common mistake is to concentrate solely on the cost of the land and materials, while failing to accurately plan out costs for the duration of the project.

Plot Your Cashflow

Plan properly. Running out of cash on a project is often caused by inaccurate budgeting and costing, or deviating from your original plans.Current market conditions make it more difficult to get a further advance on your mortgage, so its even more important to make sure you get your costings and your design right before you start the project.

Set a realistic and detailed budget - be ruthless, but don't cut too many corners, as you may end up paying more to put things right in the long run.

Try not to deviate from your original plans unless it's absolutely necessary - it's easy to get carried away and start changing your designs once you're in the middle of a project, but changes can be very costly.

Always allow a contingency budget for any unforeseen costs and issues along the way. Set 10% to 15% for a self build project, and at least 20% for renovation and conversion projects - this is very important given the difficulties in obtaining further advance lending, as mentioned above, and will give you some financial breathing space if extra funds are needed.

Consult an independent financial specialist to ensure you have access to all the funding options, exclusive deals, rates and products that are most suitable and available for your project and your financial position.

Get your cashflow right - cash is king during a project - you need to work out what cashflow you will have and how much cash you need to have access to. If you want to borrow a high percentage of the land/project and/or build costs during the project, its likely most of your money will be tied up in equity in your current house. On a standard arrears stage payment mortgage, you will need a deposit on the plot (about 25%) and then will have to pay for everything up to, at very least, completion of your foundations for a self build or preliminary structural work on a renovation or conversion before you get any more funds - this means you may need over £50,000 in cash to get your project started. If you do not have this level of cash or even if you do, but want to keep better control of your cashflow, you could investigate an advance stage payment self build mortgage, which will lend you more to buy the plot or property for renovation or conversion (up to 95%), and gives you your first release of cash for the build before you start each build stage. You can then continue to draw down funds in advance of each build stage, giving you a positive cashflow.

Save on stamp duty. The online land-finding database, PlotSearch is reporting that almost 60% of self build plots currently for sale are below the £125,000 threshold for stamp duty. If you buy a plot for £125,000 or less, you will instantly save up to £1,250!