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How can I raise finance to build a new house?

  1. Janet G from Leeds
  2. Finance questions and answers

Question

I've recently been looking to build a new house, however currently lack the finances to go ahead with such a project. What are the ways in which I can go about raising finance for such a project? Is the normal route of getting a mortgage viable or would a loan be the best option? If a mortgage were to be provided, how would the value of the mortgage be determined, for example would it be based on the value of the land?

Answer

There are a number of specific mortgage products available for borrowers who are looking to purchase land and build a property from the ground up, or whether they want to convert an existing building such as a barn or chapel to a residential dwelling - subject to appropriate planning consent etc. These products differ from mainstream mortgages in that the funds are released in stages - for example - following the purchase of the land – when the groundwork, drains and footings are in place - when the walls and roof are up and the property is windproof and watertight etc…  The advantage of this type of staged funds release is that you are only paying interest on monies that you have drawn down. 
 
The majority of mortgage products in the self build sector release the funds in arrears of each of the stages which effectively mean’s that you have to fund the stage from your own resources until reimbursed by the stage payments release from the lender. There are though several products that allow the borrower to draw the monies down in advance of each of the stages. This enables the self builder to buy materials, pay contractors and trades people without drawing on all of their own resources. One of the leading providers of this type of mortgage product is BuildStore and they also provide a range of additional services to the self builder including, finding a suitable plot, planning and project management, discount cards for the purchase of materials etc... 
 

Brian Murphy

Brian Murphy

Mortgage Advice Bureau

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