People decide to build their own homes for all sorts of reasons, including to create something unique, to put their stamp on the world or simply to prove to themselves that they can.
The government appreciates the value of people building their own homes and even set a target for it – 20,000 self-built or custom-built homes per year by 2020, up from the 13,000 that were built in 2017. Consequently the process is being made easier.
Self-build mortgages are becoming more readily available, and in England, the Right to Build scheme allows local authorities to make plots available to self-builders. Also, stamp duty only has to be paid on the land itself if the cost is greater than £125,000, or £300,000 for first-time buyers.
Is it cheaper to buy or build a house?
When it comes to building a new house, construction costs are pretty standard across the country. The difference – as with buying a property – is location. Land is much cheaper in some areas than others. A plot in Portsmouth, for example, can be three times the price of one in Manchester.
Cost will also depend on how much – if any – of the work you are able to handle yourself and how much you need to hand over to a contractor. When you budget, it’s worth adding a contingency fund of around 25% of the total cost.
As a rough guide, the cost of building a four-bedroom house in the UK is estimated at somewhere between £295,000 to £445,000 – don’t forget the difference the price of land makes. Assuming there are no expensive unforeseen incidents, self-build is likely to be cheaper than buying a new-build home from a developer.
Another bonus is that while buying a new build, the value can dip on purchase, the value of self-build properties rises on completion. Estimates suggest an increase of up to 30% can be achievable.
How long does a self-build take?
Building a house is a huge undertaking; you are responsible for everything from planning permission, design and construction to the handles on the kitchen cupboard doors.
Estimates vary wildly, and the length of time it can take to find a plot and secure the various permissions needed can take longer than the build. As a general rule, allow around six to nine months for the construction element, but be aware that the nature of your project, the land and even the weather can all impact that significantly.
What mortgage do I need to build my own house?
Mortgages for self-build projects are different in nature to standard residential mortgages. For a start, the money tends to be released in stages, following an inspection that confirms the project is progressing as it should. Hold-ups can lead to cash flow issues.
While more lenders are offering mortgages for self-build projects, the risk attached to them is perceived to be quite high and so the deposit required is generally a minimum of 20%–25%. Some lenders require a bigger deposit and may be prepared to lend, say, 75% of the cost of the land and 60% of the cost of the build.
Only you can decide whether building or buying is right for you. Here at Mortgagemove, we can help you secure a cost-effective mortgage no matter which route you go down. Contact us today to get started.