Self-build Mortgages
If you're planning on buying some land and building your own home, a self-build mortgage might be the best choice for you. In this mortgage, the lender releases the money to you in stages after building has begun until the loan is fully drawn, as shown in the example below.
| Stage |
Traditional Brick and Block |
Timber Frame |
| 1 |
Purchase of Land |
Purchase of Land |
| 2 |
Preliminary costs and foundations |
Preliminary costs and foundations |
| 3 |
Wall plate level |
Timber frame kit erected |
| 4 |
Wind and watertight |
Wind and watertight |
| 5 |
First fix and plastering |
First fix and plastering |
| 6 |
Second fix to completion |
Second fix to completion |
Bear in mind however, that not all lenders will release the money at the start of each stage. Some will only make payments in arrears, which will mean that you will have to find large amounts of money to pay for the land and materials in advance of getting funds from the lender. This results in many self-builders having to sell their existing homes and either move into rented accommodation, a caravan, or stay with relatives during their build.
Obtaining a Self Build mortgage need not be difficult, with some lenders allowing you to borrow up to 95% of land and build costs.
Foreign Currency Mortgages
It's possible to obtain a foreign currency mortgage, eg in Euros or US dollars, to buy property in the UK. Interest rates are usually lower, but a much higher deposit is required - typically 30-40%.
The advantages and disadvantages of this type of mortgage depends on currency fluctuations. If the pound is stable or rises, the borrower benefits. If the pound drops, the borrower will have to pay more.
These types of home loans should be left to more sophisticated investors, as there is the potential to get into trouble unless you have a clear grasp on the implications of such a mortgage. In fact, most lenders advise against taking out foreign currency home loans unless you're paid in that foreign currency.
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