If you’re planning to build your own home, a conventional mortgage won’t be right for you. Instead, you’ll need to apply for a specialist self-build mortgage.
Guide to self-build mortgages
Many of us dream of building our own home so that it is exactly the way we want it, but the first thing you need to work out is how to finance the build.
If you are planning to embark on a self-build, you can either opt for the DIY route, where you do most of the work yourself, and use professionals like plumbers and electricians where necessary, or you can manage the process and employ a surveyor, an architect and tradesmen who do all the work on your behalf. Alternatively, you can arrange for a contractor to manage the whole project for you.
Whichever route you choose, you won’t be able to get a standard residential mortgage, so you’ll need to apply for a self-build mortgage unless you’re fortunate enough to have the cash sitting in the bank.
Here, we explain how self-build mortgages work, and what to watch out for…
What are self-build mortgages?
As the name suggests, a self-build mortgage is a home loan take out on a property which you are building yourself.
The biggest difference between self-build mortgages and standard residential mortgages is that the funds are given to you in stages rather than as a single lump sum. This is to reduce the lender’s risk and ensure that the money is spent as planned so you don’t run out when you are only halfway through the project.
Exactly when funds are released will depend on the lender but, as a general rule, you’ll get the first tranche when you buy the land, more when the foundations are laid and a further payment when the property is built up to eaves level.
The final payments will be made when the roof is watertight and then when the interior walls are plastered, and the last instalment is paid on completion.
What types of self-build mortgages are available?
With most self-build mortgages, the money for each stage is usually only paid out once it has been completed and a valuer has visited the site.
However, some self-build mortgages release the money required for each stage of the build at the beginning rather than the end of the stage. This is particularly useful if you don’t have the cash upfront to pay your builders or to buy materials.
Rates on self-build mortgages tend to be higher than on standard mortgages, so it pays to do plenty of research before deciding which product to go for.
What are the advantages of self-build mortgages?
One of the advantages of building your own home using a self-build mortgage is that you could save yourself thousands of pounds in stamp duty. This is because there is no stamp duty on the cost of the building work, or the value of the property once the work has been completed. You only have to pay duty on the cost of the plot of land itself if the cost exceeds £125,000.
The potential financial gains from building your own home are another advantage. Often self-builders find their finished property is worth much more than it cost them to construct.
What about a Mortgage for Timber Frame?
Timber Frame Construction is the fastest growing construction method in the UK and getting a mortgage isn’t any more or less difficult to obtain than it would for a block or brick self build. More Self Builders than ever before are getting approved for Self Build Mortgages for Timber Frame and in the UK now ONE in THREE Self-build projects are constructed off-site in a secure quality-controlled factory, and here is why:
Off-site timber frame construction is universally accepted
The Structural Timber Association (UK Construction body) states that off-site timber frame construction is universally accepted by Government, stakeholders, including lenders and clients as an essential part of our delivery mix for the design and build process – reducing build time, improving quality, health & safety and sustainability.
Of course, it helps to remember that every lender is different and each has its own set of standard guidelines they want their clients to meet. Overall, self-builders alike would have the same probability rating of getting accepted for a Timber Frame Build as you would a block, mortar or brick build house.
Nevertheless, the Timber-Frame market is growing and has already a market share of 28%, thanks to its incredible sustainability and high-efficiency results – which lenders and stakeholders just can’t afford to ignore!
New timber-framed homes can be brought to market at a much faster rate than is possible with traditional brick-and-block, meaning lenders are being repaid faster and the construction industry is meeting housing demands.
For Self-Builders, after land prices, the two biggest cost factors in housebuilding are time and labour. That’s not all, more benefits include:
- Off-site construction leads to less waste of materials than block buildings meaning you don’t throw away money.
- The speed of Construction, it’s a lot faster to build a timber frame house than a block meaning lenders release funds quickly
- Sustainable and energy efficiency is doubled in a Timber Frame building, therefore, saving the homeowner thousands every year on running and heating costs.
- Savings of up to £1,500 per year on running costs. See More.
If you are considering applying for a Mortgage for a Timber Frame Build here are some of our Frequently Asked Questions:
What you need to know to get a Mortgage on a Timber Frame house..
Finance is one of the biggest challenges that many self-builders will face – with roughly two out of three self-builders needing a mortgage to see their project through. So when it comes to building a timber frame house, many clients ask us:
Will I get a Mortgage on a Timber Frame even if it is classified as a Non-standard method of construction?
QTF Timber Frame kits are manufactured using substantial pressurised treatments and in a control manufacturing environment. All major lenders will offer finance based on manufacturing properties set-up this way.
As times have changed and the development and treatment of timber have had its advances, Timber Frame has become one of the most reliable and growing forms of Construction in the UK, with an increasing market share of 28%. Although many (not all) lenders categories it as a non-standard way of construction (Other examples include Glass, Steel or Aluminium) this will not affect or have any impact on getting a Mortgage, and within the UK and Ireland it will be considered just the same as a conventional building method such as brick or block.
How much of a Mortgage will I need?
As with any self-build project, this will depend on the size and fixings of your project. A good quality home can be finished at an estimated price range of £55 – £65 per square meter (Including timber frame kit, 1st and 2nd fixings). But you can see more of our recent projects on our Pricing and Projects page which provides the Timber Frame kit price and overall price of completion on our more recent projects. QTF can offer quotes so please feel free to send us your plans and we will get a quotation for you. Email: email@example.com.
What kind of Mortgage will I need to build a Timber Frame house?
Many self-build mortgages are ‘stage release’, meaning that funding is released at key, pre-decided stages of the project. These stages vary between lenders, so have an open conversation with your lender. Your mortgage lender will need full project costs with estimates and 20% contingency before discussing funding.
Timber frame projects are attractive for self-build mortgage lenders, as timber frame construction is faster and less weather dependent than other home building methods. With advice from QTF Services, it’s easy to draw up a realistic schedule to meet your mortgage lender’s requirements. We recommend you do your due diligence on your projects and living expenditures. It is much easier to stick to the budget when building with Timber Frame, it’s faster and there is less wasted material as most of the construction takes place in a controlled factory environment.
What happens after the Kit is erected?
Once the Timber Frame kit is erected the bricklayers or stonemasons can start the building of the outside walls, this could be timber cladding, brick, natural stone, render etc. At the same time the inside work can also be started, electricians, joiners, plumbers etc. Meaning it’s much quicker to get to the next stage in your Self Build project and your lender will release funds faster.
Will building with block still be energy efficient or is timber frame better?
Block and Mortar built houses can be efficient but at a cost. One of the reasons the UK is seeing an increase in the number of homes being built with a timber frame is because of their natural sustainability and energy efficient.
A great deal of insulation is built into the house kit as standard. If so desired, customers can choose a more advanced structure including Passive House or Ultimate Closed System. QTF ‘Ultimate Closed System®’ is a specially designed kit from QTF Services, producing and offering the best thermal performance of any Timber Frame kit available in the UK or Ireland.
Timber frame construction is also environmentally friendly. Raw materials are drawn from renewable resources and not the virgin forest. Timber is a natural, non-toxic, organic, recyclable, renewable and bio-degradable material. Energy consumption in buildings accounts for 50% of the UK’s carbon dioxide emissions. Very little energy is consumed in the manufacture of a timber frame building.
If you have any more questions please send them to us at firstname.lastname@example.org.
Wish to find out more about building a Timber Frame home? Contact QTF Homes today, telephone +44 (0)28 4063 2494. Send us your drawings or house plans to email@example.com and we will be pleased to offer you a price for your self-build home.