Self build mortgages have been around for a number of years, offering finance for the ‘yet to be built’ with features such as lending on the land (so you can keep your savings back for the build) and releasing funds in stages, as the build progresses, so you don’t have to borrow the whole amount from the outset and pay interest on it all from day one. These mortgages are not just limited to brand new projects, and can be integrated into a conversion of an existing property.
If you’re considering building a home and using a Modern Methods of Construction (MMC) technique, you may be wondering what options you have and how mortgages for MMC work.
Firstly, MMC is seen as the new generation of prefabricated housing but vastly different to the prefabs used to rebuild housing stock following the Second World War. MMC schemes are being used by both developers and owner-occupiers who could benefit from the cost and time savings of mass production, but retain flexibility and control over their build.
The government is keen to support MMC in order to address the UK’s chronic shortage of housing. The Autumn Budget 2017 said “the government will use its purchasing power to drive adoption of modern methods of construction, such as offsite manufacturing” and the Office of the Deputy Prime Minister and the Housing Corporation stated it is “… a process to produce more, better quality homes in less time.”
To finance your MMC build it may be reassuring to know that many lenders offering self build mortgages will consider homes built using MMC schemes, such as those on offer from Ipswich Building Society.
According to the Building Societies Association, “building societies are generally receptive when it comes to accepting MMC as suitable security for mortgage purposes, particularly those that lend in the self-build market as they are more experienced in assessing the potential risks of non-standard construction types.”
Whilst each lender will have their own criteria, here are five things you’ll need to consider before you make a mortgage application:
- Finding a suitable plot of land
- Obtaining planning permission
- Having detailed plans of the property drawn up
- A realistic projection of costs
- The deposit you have saved and how much you need to borrow
Although not required by all lenders, you may also wish to consider whether your chosen build scheme is accredited through the Build Offsite Property Assurance Scheme (BOPAS). This means the scheme has been through a durability and maintenance assessment, guaranteeing that properties will be sufficiently durable and readily saleable for a minimum of sixty years.
A self build project can seem like a big task so if you are in any doubt about the financial side of things, or which mortgage is best, you should consider seeking advice from a specialist mortgage broker.
Guest blog by Ipswich Building Society
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE