• Ben

Self-build mortgages - where to start

Updated: May 10

Intro

Every year, thousands of people in the UK successfully self-build and with log homes coming under this heading and new government initiatives making self-building easier, it is an exciting time to be considering your own. If you’re planning to borrow from a mortgage lender to finance your project, it is worth being aware that the process is a little different to the more familiar conventional mortgage route. Neither mortgage process is without complexities and although a little dry, bear with us - it’s all useful to know!


Self-building in the UK

Although traditionally self-build financing has been relatively difficult to access compared to conventional mortgages, lenders are increasingly open to this method of construction helped in part by government initiatives aimed at increasing the self-build rate in the UK from the 13,000 properties in 2017 to 20,000 a year over the next few years. The UK, where only 7-10% of homes are ‘self-built’ each year, is currently lagging behind much of the world when it comes to self-building. In Canada this is as much as 50% and Austria, the world leader, 80%! But with more and more people looking to design and build their own homes, accessing funding is getting easier with more lenders seeing self-build as a viable route to home ownership.


Just as there is no VAT payable when purchasing an existing building, as long as your project is intended for use as your primary residence and not for business use (including holiday lets), the good news is that VAT costs on materials and labour can be reclaimed and zeroed out. This can make self-building your dream log cabin financially more economical than modifying an existing house to your needs.

Whilst the risks to a lender remain relatively high with all the unknowns of self-builds, and 25% deposits and higher interest rates are normal, you may only be tied into your self-build mortgage while your house is being built. On completion some lenders will allow you to remortgage onto a standard mortgage with a lower interest rate.


A log house under construction