Have you ever considered building your own home, either self or custom-built, or do you consider it an out of reach dream?
The National Custom and Self Build Association (NaCSBA) and Building Societies Association (BSA) carried out research in October 2020 that suggested 1 in 3 adults are interested in building their own home.
On the 24th April, the government announced £150m in funding to kickstart a self-build revolution.
We take a look at what that means for you if you’re considering a self-build or custom home.
Current self-build and custom home mortgages
Right now only 7% of homes in the UK are built via self or custom build.
As it stands self-build and custom home mortgages are reviewed on a case by case basis and can sometimes be ruled out of peoples options, only being a realistic ambition of a small number of people.
Whilst the NaCSBA defines a self-build as ‘projects where someone directly organises the design and construction of their new home’, and custom build as one that a property developer would take on most of the work, mortgages are treated the same.
However, you won’t be applying for a standard mortgage and lenders usually apply a maximum LTV (loan to value) of 85% on land purchase and 85% on build costs.
Unsurprisingly it means that finding money to finance a project is one of the biggest hurdles.
Furthermore, almost all custom and self-builders have been unable to access government Help to Buy equity loan schemes.
What will the new government scheme mean for self and custom builds?
The announcement of a new Help to Build scheme was supplemented by the Self and Custom Build Action Plan. In it, the government recognises that there is the capacity to expand the self and custom build sector to produce 30-40,000 homes a year to support their ambition to build 300,000 additional homes a year.
There are several recognised barriers to self and custom builds including:
- Access to finance (as we’ve seen above) – staged mortgages, higher rates and lower LTV.
- Access to land – a lack of serviced plots available.
- Expertise/knowledge gaps – consultancy and knowledge of self and custom build expertise is limited.
The recent announcement looks at tackling access to finance.
In the new ‘Help to Build’ scheme the government intend to make it easier and more affordable for people to build their own homes, whether they are commissioned, made to order or built from scratch.
They want to make it a realistic option to build your own home, not one limited to a small number. It will look help those with smaller deposits access funding and lower mortgage rates. The intention being that it will free up more capital – the scheme is based on the cost to build your own home and not on the price of the completed home on the market.
The scheme will mean that building your own home could be a mainstream realistic option enabling more people to have more control over the design and specifications of their projects, ensuring a home that suits wants and needs.
In short, it will offer a dedicated scheme to self and custom builders where they have been previously unable to access government-backed schemes, one similar to the Help to Buy scheme.
What will the scheme look like?
Details of the scheme and how to apply won’t be available until late summer.
The Prime Minister has first appointed Richard Bacon MP to review and report on how they can scale up delivery of self-build and custom homes, which will be published in the summer.
However, we do know that the scheme has been developed with Homes England under a NaCSBA proposed model. We also know they intend to engage lenders, brokers and insurers in the development of the scheme which will be important to its success.
We’ll therefore look to update and share the detail of the scheme once it’s published.
However, if you’re looking to self-build or custom build your new home please don’t hesitate to get in contact with us at The Online Mortgage Guru.
We have access to advisors and brokers who have expertise in this area and can offer you advice on your options as well as search for suitable options within the whole of market lenders.