In light of the Government’s plans to relax planning laws for the development and building of new homes as part of its “national crusade to get homes built”, Private Finance has said that self-build is likely to be one of the biggest home-buying trends of 2016.

The broker has seen a recent increase in enquiries from clients interested in building or extending their own homes and has noted a particular increase in commuter towns in the Home Counties such as Harpenden in Hertfordshire.

However, Private Finance has also warned of some of the common pitfalls of self-build projects:

1. Self-build is specialist finance

This is due to the greater inherent risks involved and is only available through a limited number of lenders.  The terms, structure and release of funds is very different to mainstream lending.  It is essential to get independent advice to understand how this works in advance of commencement of work.  As a minimum you will need a schedule of works showing anticipated costs and timescales involved.

2. Take care with timings

If refinancing post completion some lenders may consider this debt consolidation even if works were completed using savings and the refinance is simply to replenish savings spent.

3. Remember that standard mortgages will have limited development permitted

Breaking with these terms will break the conditions of the mortgage and if the property is uninhabited the mortgage will no longer give you the security of being regulated.
This leaves a major risk of the lender calling in the borrowing pre-completion.


4. Check the terms of your buildings insurance

If carrying out significant works to your property or building another property adjacent, your buildings insurance may not cover you in the event of damage.  Whilst specialist insurance is available the premiums will be significantly higher, however you will be covered.  There have been a number of multi million pound properties that have collapsed recently following basement dig outs.  It is the owner’s responsibility to ensure that the building is insured.


5. Always maintain a healthy cash reserve

The worst financial position is to run out of funding before completion as it will be   very difficult to secure funding part way through.  Work closely with your quantity surveyor and use fixed priced contracts with a trusted builder to mitigate this.  Build in a contingency fund and then double it!

Simon Checkley, Managing Director of Private Finance says:

‘Self build is not as straightforward as some people may think. There are many common pitfalls to avoid which is why the help of an experienced adviser will prove invaluable to this process. The good news for buyers who seek specialist advice with their self-build project is that there are a variety of affordable and flexible finance options available to them. There are many competitively priced mortgage products available in the current market from a variety of different lenders including Saffron, Ipswich, Melton Mowbray and Harpenden Building Societies, with some products priced from as little as 2.7%.’

Paul Cavill, Manager of Hertford Planning says:

‘One of the biggest obstacles for those wishing to undertake a self-build housing project has always been a lack of suitable sites. The Government has recently sought to address this via the introduction of the Self-build and Custom Housebuilding Act 2015, which requires local authorities to keep a register of people who are looking to acquire land to build their own home. The Housing & Planning Bill 2015-16 is also proposing to expand upon this by introducing a requirement for local authorities to grant permission for serviced plots of land to meet the demand identified by these registers. These measures should help to make it easier for potential self-builders to make their dreams a reality. On this basis we are certainly expecting to see an increase in self-build enquiries in 2016.’

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