May’s General Election and the subsequent Queen’s Speech was welcome news for self-build with the Government re-affirming its commitment to continue to provide self-build and custom-build opportunities and deliver aspirational home ownership under its ‘Right to Build’ policy.
Introduced under the previous coalition government, ‘Right to Build’ sets out to give individuals and community groups the right to self-build by requesting their local authorities make available ‘shovel-ready’ serviced custom-build plots. To spearhead this scheme, back in September 2014 eleven vanguard councils were selected to become the first to offer this new right to their residents, which included operating a dedicated custom-build register to ascertain local interest and demand.
The Self Build & Custom Housebuilding Act, proposed by South Norfolk MP Richard Bacon, followed suit now making it mandatory for all local authorities to establish a register of individuals who have expressed an interest in finding land for their self-build projects and to recognise the desire for custom-build housing when drawing up their local plans.
Whilst encouraging for those who have strived to find a suitable self-build plot, these measures also create new, affordable and aspirational home ownership opportunities – with all the benefits and cost savings of self-build – particularly for those looking to get on the housing ladder or simply wishing to remain living in their local community.
It’s not just local authorities who are making land available for self-build. Through additional government initiatives and grants, private landowners, developers and nationwide housebuilders are making provision for custom-build plots across the country. Whilst offering huge scope and flexibility in terms of involvement and design, consideration to individual budgets and requirements is met with a range of property options, such as detached, semi-detached and terraced plots.
As a leading provider of homebuilding finance in the UK, we are particularly encouraged by the Government’s commitment to ‘Right to Build’. With the shortfall in housing stock and projected surge in property prices, this announcement can only perpetuate an increase in demand for those looking to build their own homes. And with custom-build being demand-led rather than speculative house-building, it is anticipated that enabling developers will recognise the financial benefits custom-build offers, thus re-invigorating the housing market and stimulating economic growth.
Accordingly, we anticipate that this government scheme will also give those lenders – who were previously nervous of the risk associated with self-build – the assurity and confidence to enter the self-build lending market. This can only prove beneficial to those looking to obtain a self-build mortgage as the increase in lenders entering the market will ultimately provide more choice of finance options.
Whether you opt for self-build or custom-build, securing finance for your homebuilding project is no different. As with plots listed on www.plotsearch.co.uk – the UK plot-finding site that lists plots with genuine planning permission – all custom-build sites are presented with planning permissions in place, allowing for a smooth application process.
Choosing the right mortgage scheme is naturally dependant on how you wish to finance your build and how much cash you have in savings. If you choose an arrears stage payment mortgage then you will need sufficient money for a deposit on the custom-build plot of between 15-25%, as well as money to pay for the materials and labour for the early stages of the build. If you do not have sufficient savings then you may decide to sell your current home to release equity before starting your custom-build project.
If you have a relatively low deposit, don’t want to sell your existing house or move into temporary accommodation before your new-build is complete, then an advance-stage mortgage arrangement such as BuildStore’s Accelerator scheme may be right for you. With 90% borrowing granted to purchase the custom-build plot and 90% borrowing on build costs, this particular scheme ensures that cash flow is not an issue during the build.
As with a ‘traditional’ self-build mortgage scheme, interest is only paid on the funds drawn down rather than the full amount. Additionally, you are exempt from stamp duty if the cost of your custom-build plot is less than £125,000. With custom-build giving the self-builder flexibility to do as much or as little as desired, and with added benefit of groundworks and services costs met by the custom-build enabler, it is still estimated that completed homes are worth an average 25-30% more on completion than they cost to build.
BuildStore’s Custom Build Homes has now partnered with Custom Build schemes throughout the UK, providing essential advice and guidance on all aspects of custom-build including finance, insurance and warranty schemes.
Whether you choose self-build or custom-build, ensuring you have the right finance for your project is paramount. Take the time to talk to specialist, experienced advisers from the outset so you are clear of what your finances allow and your onward financial obligations.