Owning a house is a dream that everyone strives to materialize. Many are successful and that is because there are so many types of mortgages available in the market. However, when you are planning to construct your own dream house then a conventional mortgage may not be the right choice for you. So what is the other option? Well, the other option is to get a specialist self build mortgage. Remember that such mortgages are offered only by a few lenders.
Building your own house can be a very exciting experience but you should be very careful and plan your finances well to avoid regretting later. While building your own house, there are two ways to get the work done – one is by supervising all the work yourself and the other is by hiring a contractor to manage everything on your behalf. In both the cases, getting a standard mortgage sanctioned is not possible. So, self build mortgage is the option that you have to go with.
What is a self build mortgage?
It is a home loan that you get for a property that you build by yourself. The main difference between a self build mortgage and a residential mortgage is that you get funds in different stages rather than getting a lump sum amount at one time. This step is taken by the lender only to reduce the risk factor. The timing of all the installments of the fund will be decided by the lender.
Another notable difference between the two types of mortgages is the difference in their rates. Usually self build mortgages have higher rates than residential mortgages.
Advantages of Self Build Mortgage
It is not all downhill for this type of mortgage. One of the biggest advantages in availing this type of mortgage is that you can save a lot of money on stamp duty. You do not have to pay anything for the structure but you may have to pay for the land itself if its value exceeds certain limit. To add to this advantage, often self build properties fetch you more financial gain.
Hassle Of Self Build Mortgage
This type of mortgage has more paperwork involved. You will also have to put down a big percentage (25% to 50%) deposit at the start. Alternative accommodation while your property is being built is another area from where money will leak. You also have to remember that your completed property may be repossessed if you fail to keep up with the repayment of the mortgage.
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