Financing your self-build

Want to do a self-build? How do you fund it? Ron Beattie from Beattie Passive discusses the options.

Set the budget

Although self-building offers a more affordable route to your dream home, it's important not to underestimate how much

this figure will be. The key is to do your

research, set realistic expectations and

boundaries, and most importantly, stick to

them. It's easy to get carried away with the

planning of your unique home by adding

every conceivable luxury and gadget on

the market, but the reality is that it's vital to

plan and calculate, in detail, exactly what

you need and how you will be funding the

project.

A good old fashioned spreadsheet

can work very effectively to keep costs

in check across the key areas of: land,

labour, materials, finance/professional fees,

insurance, utilities, contingency, applications

and VAT. Getting accurate figures for these at

the very start can make all the difference to

the overall project.

Need a mortgage?

When it comes to self-build mortgages,

there are two types available – arrears and

advance. With an advance stage payment

mortgage, it may be possible to borrow up to

90% for the land with just outline planning

permission. This is an added bonus as some

lenders will only lend with detailed planning

permission which can take months to

arrange and may then consequently restrict

the plot opportunities you have. An advance

stage payment mortgage also makes buying

at auction a possibility and speeds up the

process of acquiring a plot, whilst also

reducing the deposit required. Further funds

are released for the build costs – again up to

90% and money is released ahead of each

build stage.

An arrears-based mortgage on the other

hand, allows you to receive payments, in

stages with each payment being transferred

after confirmation that the stage has been

completed. But whichever mortgage you

select, pinpointing those initial planning and

budget costs should ensure you get the best

deal for your project.

VAT or no VAT?

Luckily for the majority of self builders, new

builds are zero-rated, which means that

a VAT registered builder or subcontractor

must zero-rate their work and not charge

VAT on any labour-only or supply and

fix contracts. However, you will have to

pay VAT at full rate for the purchase of

any materials that the builder makes on

their own account with this being largely

recoverable at the end of the project.

When it comes to the overall financing

of your project, it may seem a minefield of

spreadsheets and paperwork but thorough

planning and detailed budgeting at the

outset will pay dividends in avoiding any

nasty surprises along the way, and ensuring

you benefit financially from what is likely to

be your most valuable asset.

You can contact Ron Beattie at Beattie

Passive on 08456 449003 or visit

www.beattiepassive.com