How to finance a new self-build home?
Whether you are a first-time buyer, funding a new build via the sale of another property or you are a cash buyer, we’re here to help walk you through important steps to prepare to finance your new self-build home.
Prepare | Prepare | Prepare
We cannot stress the importance of preparing enough. Every year between 12,000 to 18,000 self-build homes are built in the UK which is a great achievement but many of these run over budget.
Take a moment to consider what costs might be incurred and how you are going to obtain these costs. Here is a quick summary of the main cost heads:
Costs associated with Neat Living:
- Design: Architectural, structural and heating/plumbing/electrical services.
- Planning and Building Warrant: Organising the preparation of planning application and building warrant together with statutory fees due to Local Authority (LA).
- Cost planning: Preparing budget cost plans and competitive tender packages for contractors to price.
- Neat Living Kit cost: Manufacture, delivery and possibly erection (depending on the build system).
Costs associated with others:
- Plot: Buying of the plot and preparing the site could involve clearance of trees or old buildings and the like. Permissions may need to be applied for and granted by the local authority (LA).
- Costs, by a local contractor(s): Erection of the kit, (if not completed by Neat Living, depending on build system). External finishes to walls and roof elements. Internal finishes to flooring, stairs, partitions and walls, kitchen and bathrooms. Services including heating, plumbing and electrical – including photovoltaic (PV) or solar. Utilities.
- Fees: Legal, finance, valuation, mortgage arrangement.
- Other costs: Living expenses during construction and associated moving in costs.
About £/m2 rates (and why you shouldn’t rely on them).
A £/m2 sq rate is the cost of an item divided by the area – e.g. a carpet costing £1,000 which covers a 100m2 area has a rate of £10/m2.
Whilst this simple example appears to quickly illuminate costs, the use of such a method across construction projects is generally unreliable. Here are some questions to ask yourself:
- Does the sum include labour and fitting cost?
- When comparing between products or companies, how sure are you comparing like for like – apples versus apples or apples versus lemons?
- Where was the work undertaken? Large fluctuations can occur for the same item fitted in one location over another location.
- When was the work undertaken? Large fluctuations can occur for the same item fitted at some point in the past versus some point in the future?
- Does the sum include VAT?
- If it includes VAT is it recoverable as a new build cost?
In a nutshell, trying to build a cost plan on previous generic and out of date costs to establish m2 rates will never provide the cost surety that is required when planning a project.
Solutions that we provide
We provide the range of solutions, that will help you to prepare, including:
- Full architectural, structural and services design.
- Ground Investigation trial pits and reports with foundation, surface and foul water drainage design.
- Budget Cost Plan – above ground and below ground costs.
- Competitive tender service.
Some Good News – Value Added Tax on a New Build!
Did you know that VAT charges on a new build home are recoverable under HMRC rules? For all information see the HMRC website. A link is available here: https://www.gov.uk/vat-
Remember – Always Obtain Independent Professional Financial Advice.
Neat living does not offer financial advice, therefore, you should seek your own independent financial advice from a qualified professional or suitable organisation.
Advice on Mortgages & Finance
We recommend your first point of call when thinking about your mortgage options should be BuildStore Mortgage Services – the UK’s self-build mortgage experts. Their specialist mortgage advisers will recommend and tailor a borrowing solution to suit your financial circumstances, build and a payment schedule.
Remember, we can help to provide the necessary cost plan information and building design information to help you with your application.
Clink Enquire at BuildStore and register your details today – they’ll follow up to have an initial chat when you are ready.
Self Build Mortgages and Staged Payments
A self-build mortgage allows custom builders to borrow money in clearly defined stages, rather than a lump sum. We would recommend thoroughly investigating in detail how the lenders define these lump sum stages and their criteria for the staged or milestone drawdowns and how these relate to our payment terms. i.e. Full payment of the kit must be made before it is dispatched from the factory, which is generally consistent across the industry.
These stages should coincide to allow you to purchase land and organise subsequent work such as groundworks and laying foundations in preparation for the kit arrival. The lender will typically insist that work is independently assessed and valued as the work proceeds and we can work with an independent assessor if required.
You should make early enquiries about the requirements of different lenders. These include finding out about how much deposit you will need to put down; this could range from 25% to 50% as well as understanding all of the terms and conditions.
Don’t be afraid to shop around as different lenders can offer better deals or conditions. Once again, we would recommend discussing these aspects with your selected financial advisor.
Are you buying land or building in the UK?
Stamp Duty Land Tax (SDLT) and Land Buildings Transaction (LBT) Tax and Land Transaction Tax (LTT) explained.
First of all, don’t worry – not all of these will apply to you! Depending on which part of the UK you want to build, different rules apply in relation to so-called purchase taxes.
Scotland: For LBTT see Revenue.scot
England and Northern Ireland: For SDLT see Gov.uk
Wales: For Land Transaction Tax see Gov.Wales.
IMPORTANT NOTICE: In addition to following the above links for current information, we would recommend discussing these aspects with your selected professional financial advisor.
Land Buildings Transaction Tax in Scotland:
In Scotland, the Land and Buildings Transaction Tax (LBTT) is a tax applied to residential and non-residential land and buildings transactions (including commercial leases).
LBTT is administered by Revenue Scotland, with support from Registers of Scotland (RoS).
Tax is payable at different thresholds or rates on each portion of the purchase price within specified tax bands. As well as this, the Additional Dwelling Supplement may apply.
For detailed information, including thresholds, guidance on how to submit or amend a tax return, guidance on reliefs and exemptions and worked examples can be found on the Revenue Scotland website. Tax calculators based on current rates and statistics on LBTT transactions and revenues are also available.
Stamp Duty Land Tax in England and Northern Ireland:
Stamp Duty Land Tax (SDLT) applies in England and Northern Ireland when you buy a freehold property, buy a new or an existing leasehold, or buy a property through a shared ownership scheme or are transferred land or property in exchange for payment, e.g. you take on a mortgage or buy a share in a house.
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland. There are thresholds and conditions that apply to SDLT so make sure you check these out at the www.gov.uk website.
Land Transaction Tax in Wales:
In Wales, a Land Transaction Tax is paid.
As with other parts of the UK, there are specific thresholds and conditions that apply with LTT, so follow the link to the www.gov.wales website.
Thinking About How to Get Started?
Call us today on 0141 297 1927 or use the Contact Us Here button to send us a message.