Dreaming of a self-build? Then you need to get your finances sorted first. Here's how...
By Nancy Alsop
It is not hard to fathom why self build housing, which now accounts for 12 per cent of annual building projects in the UK, has been steadily on the up since the early 1990s.
Despite requiring a lot of hard work, the rewards speak for themselves; you end up with the home that you want, just where you want it, which has got to be liberating. But in order to cash in and take full advantage of the self-build, there are just a few financial rules to consider, whether you are planning to get handy with the raw materials yourself, or you intend to hand over construction responsibilities to more experienced parties.
The social structure of the typical self builder has shifted over the past two decades; where once the market was dominated by those who could not afford conventional housing, it is now people in the higher earning brackets who are opting to construct their own dwellings, rationalizing that a self-built house is better value for money.
This perception of better value is based on having the scope to build bigger, to incorporate eco benefits and the fact that self builders are able to purchase their homes at cost price (saving, on average, 30 per cent of the money they would have forked out for a ready-built home).
As such, mortgage lenders soon cottoned on to the fact that the market was no longer a no-go area. In fact, self build mortgages are a relatively low-risk option for money lenders - customers' incomes are typically above-average while self builders tend to be highly motivated
However, it would be a misapprehension to assume that self-building necessarily guarantees a low-spend. The average project now costs over £150,000 which, though lower than the average mainstream house-cost, is still a sizeable chunk of money. It is common sense to identify a budget - and to stick to it. You'd do well to remember when settling upon a figure that self build projects come with their own set of hidden costs, some of which are nigh-on unavoidable (delivery delays, which in turn rack up additional labour costs; amended plans, which lead to unexpected building expenses; planners requiring certain or expensive materials, are just three costly examples). The solution is to factor in these eventualities to your overall budget. Who knows, if you are strict enough, you could even come in under budget.
Once you have settled upon a piece of land (the average cost of which stands at £44,000, with plots in the south-west almost double those in Glasgow), the next stop is the mortgage broker. At this stage, you will already have acquired planning permission, which is essential in order to raise a mortgage. Without permission, it is not advisable to buy the land at all, the price of which, if you failed to gain authorisation for your new home, would instantly plummet.
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