How to save & buy a self build house

[MagicalTrevor]

... from a financial perspective (this is a finance question rather than a house question)

First thing, I'm a Ltd. Company Contractor (this will affect the answer to the question I suspect), I'm able to save a healthy amount of money, I've always dreamed of being able to self-build i.e. buy one of those kit houses and get someone to throw it up. However, I'm not sure of the best way to go about saving and also financing it.

In very simple terms, I need to:

• Buy the land (£200k)
• Pay for services (£50k)
• Buy the house and construct it (£250k)

(The costs are irrelevant at this stage but serve to illustrate my query)

Should I:

• Pay off as much of my current property with a view to it being worth £200k, buy the land using that money and then finance the self build
• Save the money, buy the land using the money and effectively sell the current house (retain the mortgage?) and using that to buy the new house (kit)
• Pay off the current house and go racing

I realise it's unlikely to be as straightforward as above but I'd hate to pay off the existing mortgage only to find that it's then hard to raise the rest of the finance to buy the land or buy the house.

Somebody else must have done similar?

[Kudos]

MagicalTrevor said:

First thing, I'm a Ltd. Company Contractor (this will affect the answer to the question I suspect), I'm able to save a healthy amount of money,

How are you planning on getting the money out of the company? Income & dividend (and paying the tax owed on this) or directors loan? Some mortgage companies will not accept directors loans as deposit

Edited by Kudos on Wednesday 9th October 15:46

[worsy]

MagicalTrevor said:

... from a financial perspective (this is a finance question rather than a house question)

First thing, I'm a Ltd. Company Contractor (this will affect the answer to the question I suspect), I'm able to save a healthy amount of money, I've always dreamed of being able to self-build i.e. buy one of those kit houses and get someone to throw it up. However, I'm not sure of the best way to go about saving and also financing it.

In very simple terms, I need to:

• Buy the land (£200k)
• Pay for services (£50k)
• Buy the house and construct it (£250k)

(The costs are irrelevant at this stage but serve to illustrate my query)

Should I:

• Pay off as much of my current property with a view to it being worth £200k, buy the land using that money and then finance the self build
• Save the money, buy the land using the money and effectively sell the current house (retain the mortgage?) and using that to buy the new house (kit)
• Pay off the current house and go racing

I realise it's unlikely to be as straightforward as above but I'd hate to pay off the existing mortgage only to find that it's then hard to raise the rest of the finance to buy the land or buy the house.

Somebody else must have done similar?

I was in same boat. Am a contractor as well so we.......

Found Plot
Put house on market with intention of moving even if the plot fell through
Organised mortgage for self build on basis of affording even if home move collapsed (note you'll need to fund rolling 25% plus whole of next stage)
Purchased plot and sold house

Now we had the equity in the house to use, so effectively funded the build with this, plus dividends plus rainy day fund.

At the end of the build I was down to last 5k, and the mortgage has replenished savings.

Thankfully was in work all way along but you need to dial in any bench time.

[MagicalTrevor]

Kudos said:

How are you planning on getting the money out of the company? Income & dividend (and paying the tax owed on this) or directors loan? Some mortgage companies will not accept directors loans as deposit

Edited by Kudos on Wednesday 9th October 15:46

Income and dividend with all the necessary tax. I have no objection to that... although I have heard of people using 'entrepreneur relief (or tax)' but that sounds a bit naughty to me

[MagicalTrevor]

worsy said:

I was in same boat. Am a contractor as well so we.......

Found Plot
Put house on market with intention of moving even if the plot fell through
Organised mortgage for self build on basis of affording even if home move collapsed (note you'll need to fund rolling 25% plus whole of next stage)
Purchased plot and sold house

Now we had the equity in the house to use, so effectively funded the build with this, plus dividends plus rainy day fund.

At the end of the build I was down to last 5k, and the mortgage has replenished savings.

Thankfully was in work all way along but you need to dial in any bench time.

Cheers for that