In the past, those who chose to build their own home found it more difficult to secure a mortgage than those purchasing ready built homes. However, the strong resale prices that are being achieved for self-build homes has meant that it is now much easier to arrange the required finance. In fact, lenders are outdoing each other with special offers and packages to attract this type of business.
The mortgage market is now much more competitive and there are many more lenders prepared to finance self-build homes. This additional competition translates into a much better choice for customers.
When it comes to financing self-build properties, customers need to shop around for the best deal available. For some customers, this may mean securing the maximum amount of finance, for others it may mean securing advantageous repayment terms like interest-only terms for first 12 months, while others will be primarily focused on rate. It is important for customers to decide what their priorities are and then to meet with a specialist adviser who will be able to guide them towards the most suitable lender based on their circumstances.
While the mortgage situation has improved immeasurably for self-builders, how lenders treat self-build mortgages can still vary greatly. The amount that lenders are prepared to lend for pure site costs can vary from 60% at the low end right up to the 100% recently offered by one Irish lender. Several lenders will not offer interest-only periods while others will offer an interest-only option for up to 5 years depending on the case. Also, some lenders will offer deferred payment options for up to 6 months while others will not.
Customers looking for any type of mortgage finance need to choose their mortgage adviser carefully to ensure they get the best possible advice. This is doubly important when it comes to self-build mortgages as some mortgage brokers tend to do a higher proportion of these types of loans than others and will thus have more experience. The location of the broker’s business should give some indication of a broker’s experience in this area.
The final point to remember is that higher sums are now available from the banks for self-build mortgages. Borrowers used only be able to get finance of 75-80% for self-build mortgages. This has now gone up to 100% with some banks. This can include 100% of site costs if the site has full planning permission granted or up to 92% finance for site costs if outline planning permission has been granted.
