Help to Build: Don’t buy build it

Kevin McCloud: “Building your own home isn’t a dream limited to just the rich or adventurous. Anyone can do it! Young couples, retired people, people working together in a group, the disabled – anyone, and the rewards are fantastic. The home you really want, designed to exactly match your needs and, typically, savings of between a quarter and half of the costs.”

There are a number of lenders offering self build mortgages up to 75% to 80% LTV. Typically, they are structured on standard variable rates of 4.5% to 5.6% during the course of the build, and then you are allowed to switch to a standard residential mortgage on completion of the build. For information about how they work and brokers that specialise in arranging self build mortgages, visit the self build mortgage section.

Where can I get land?

There is a good choice of self build mortgage providers, but the real issue is where you find land to build on. There are a number of online sources that list self build plots:

Zoopla

Primelocation

Rightmove

Plotfinder.net

Selfbuildportal.org.uk

Buildstore.co.uk: Has a database of self build land opportunities. It costs £20 for four months of unlimited access or £35 for the year.

Estate agents e.g. Savills, Knight Frank constantly advertises development opportunities, but they are all featured on the property search engines.

Local Councils

Another area to closely monitor for self build plots is your local authority. Councils have been tasked to free up more land for custom and self builders.

Right to Build: In September 2014, the Minister of State for Housing and Planning, Brandon Lewis, announced plans to help custom or self builders turn their dreams into a reality. Eleven areas have been selected, to establish and maintain a register of prospective local self builders with a view to offering them suitable ready to build, serviced plots.

The 11 vanguard areas are:

1. Cherwell District Council

2. South Cambridgeshire District Council

3. Teignbridge District Council

4. Shropshire Council

5. Oldham Metropolitan Borough Council

6. West Lindsey District Council

7. Exmoor and Dartmoor National Park Authorities

8. Pendle Borough Council

9. Sheffield City Council

10. South Norfolk District Council

11. Stoke-on-Trent City Council

Custom & Self Build Scheme (CSB): To assist local authorities to meet their need for more custom and self build projects, Capita Asset Services has developed a CSB scheme aimed at first time buyers and home movers. It is a national scheme available to all local authorities, in partnership with banks and building societies.

Under the scheme, local councils will provide suitable building plots for interested self builders.

Prospective self builders will then approach lenders participating in the scheme, for a 95% LTV mortgage but on similar terms to a 75% LTV mortgage.

Once the mortgage has been agreed upon in principle, self builders will be required to pay a deposit of 5% of the total cost to the council.

The council finances the construction of the new home, and on completion, the mortgage lender pays the balance of 95% to the council and places a charge on the property.

The self builder is then left with a 95% mortgage, albeit at 75% LTV terms.

The council, in essence, is underwriting the high loan to value provided by the lender.

For example:

A Council agrees to sell you a plot of land to build a 3 bedroom detached house.

The Council states the cost of land and build cost at £200,000.

You apply to Lloyds Bank for a 95% mortgage, and they provide an agreement in principle to lend you £190,000.

You pay a 5% deposit (£10,000) directly to the Council.

The Council funds and completes the construction of your custom property.

Lloyds Bank pays the Council £190,000 and places a charge on the new build property.

You move into your new build custom property with a 95% LTV mortgage (£190,000) but on similar terms to 75% LTV rate, courtesy of the Council providing a financial indemnity to Lloyds Bank.

The real beauty about this scheme is that the Council are in control of the build from start to completion, and the lender does not need to make any stage payments, making it a more attractive option in comparison to the conventional self build mortgages.

Cecilie Booth, Director of Capita Assets, has had talks with over 100 local authorities about how the scheme can be implemented. Lloyds Banking Group has agreed to support the scheme and Cecilie is talking to more lenders about joining Lloyds on the CSB mortgage panel.

Undoubtedly, it’s still early days, but if you are looking to build your own home and looking for land, then making enquiries with your council in the first instance may be a smart move as there will be a finite number of plots available. As they say, first mover advantage.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE