Self build mortgages - How do they work?

[Goochie]

Like many people (I guess) my wife and I love the idea of building our own house. My father was general manager of a property developer for 20 years before retiring recently and I'm well placed to get electrical work done FOC. All-in-all I think we could manage the whole "building" part of it just fine.

However, we dont have a massive amount of equity in our current property that we could use to buy the land, let alone the materials etc.

So are we just dreaming, or can you get self-build mortgages that allow a reasonable LTV and decent salary multiples? I believe some allow staged payments for land, footings, roof-on etc. and that sounds quite attractive.

[hamski]

Options are limited at the moment. Basically, you'll be limitde to 75% of the land purchase, with 75% being available in stages as work progresses, normally, footings, first floor, wall plate and roofed in. Bear in mind however, that the work required to get to footings stage can cost a fair amount, but rarely increases value by the same.

You'll have to show sufficient earnings to cover the new mortgage and also your existing repayments, assuming you'll be living in the existing property while you build.

Not many lenders out there at the moment - BMSolutions and Norwich & Peterborough probably the keenest. You could look at commercial, but development finance from the banks is rarely available at prersent.

[m4tt]

Some lenders will also require interest cover at 10% in an account they have a charge over. Also worth considering what you will do at the end of the self build loan, will you get a mortgage or will you be selling another property to pay it off?

[Goochie]

We're planning on selling our current property and living with family during the build. This will give us about £20k in the bank at the start of the self-build.

At the end of the build we plan to stay living in the house.

[scotal]

What sort of budget are you looking at for the build?
Do you already own the land?