Financing your self-build project

11th January 2019

 

Borrowing to build

Self-builders require more money up front than conventional homebuyers. This is because they have to buy their building plots and fund their planning applications before they can apply for any loans. Self-build mortgages tend to be interest-only as fixed-rate loans have substantial exit fees for those who change loans when the work is finished. Interest rates for loans are typically over 5 percent and self-builders should expect to take as long as six months to get their finances in place before applying for a loan. It is common to expect to raise around 25% of the cost of the land and building materials upfront and before applying for a mortgage it is pivotal to have full or outline planning permission.

Lenders are guided by valuers because they do not want to lend on a property that is worth less than the loan. They need market evidence of the resale values of the properties they are about to build. This is especially true of prefabricated buildings; they will ask for documented evidence of their long-term structural integrity and longevity.

 

Get properly insured

It’s recommended that you have your own self-build insurance policy for public liability, fire, theft and storm damage as well as for situations which could arise with tradesmen not completing the work. This can usually cost in the region of £500-£1000, depending on the size of the contract.

Many self-builders worry about their builder going bust. It is possible to attain a National House-Building Council warranty, whereby the NHBC will arrange to either hire another builder or pay for the remaining work to be completed.

 

Check your tax position

Stamp Duty must be paid for properties purchased for more than £125,000 or £150,000 for non-residential land and properties.

For those gifted land by family members, no stamp duty is due, even if another residential dwelling is owned. Self-builders who pay for land pay no more than the initial stamp duty, however much the property is worth when completed. This has to be paid within 30 days of buying the plot and only when they sell their original property within three years can they claim this back.

New properties are free of VAT and therefore a self-builder can claim back most of the VAT paid on materials. However, the tax cannot be reclaimed on professional and supervisory services, tool and plant hire and household appliances such as cookers and fridges, even if they are built in. You cannot claim back the VAT if you plan to use the property for a business purpose, but this does not extend to working from home.



 
Other items in Blogs
 
Peter Brown
13th January 2019 5 things you need to know about Making Tax Digital

  Making Tax Digital (MTD) is the hot topic this year. It’s one of the most fundamental changes to the UK tax system since the introduction of self-assessment. From April 2019, VAT registered businesses with a turnover of over £85,000 will be required to keep records using software approved by HMRC.  We have condensed the…

Read More »

Stephen Malkin
11th January 2019 Financing your self-build project

  Borrowing to build Self-builders require more money up front than conventional homebuyers. This is because they have to buy their building plots and fund their planning applications before they can apply for any loans. Self-build mortgages tend to be interest-only as fixed-rate loans have substantial exit fees for those who change loans when the…

Read More »

Stuart Kierman
9th January 2019 Running A Business From Home

  If you are looking to start up a business, it is likely to be home based, at least in the early days.  Figures suggest that over 60% of businesses start in this way and that there are 2.9m businesses in the UK operating from home. This blog looks at some of the common questions…

Read More »

Richard Alecock
21st December 2018 Making Tax Digital …… Only 100 days to go!

It’s time to decide how you will digitalise your records in order to meet HMRC requirements ahead of April 2019 HMRC wants the UK to be one of the most digitally advanced tax administrations in the world, improving efficiency, effectiveness and ease of compliance. Their plans signal the end of paper accounting for millions across…

Read More »

Ian Piper
19th December 2018 A Taxing Christmas?

Business owners, like the rest of us, will be all too aware that Christmas is a ‘challenging’ time. A short working month usually means less production, less sales and less payments from customers. Add to this cost of staff Christmas bonuses, various festive jollies and large tax bills just around the corner in January, and…

Read More »

Adrian Mackenzie
18th December 2018 Financial Services Apprenticeship Scheme

We are pleased to announce that our wealth management department are looking to introduce a Financial Services Apprenticeship scheme.   The aim of this scheme is to identify local talented individuals and help them to develop into the next generation of financial advisers/ planners and be part of our successful wealth management team.   Once…

Read More »