How to plot a path to build a dream home
Independent 26/04/03
As house prices continue to rise, more homeowners are being tempted by the potential savings from building their own dream home. According to the organisers of the recent Homebuilding & Renovating Show, self-builders and renovators account for about 25,000 homes each year.
The self-build company and mortgage lender BuildStore estimates that its typical customer saves between 25 and 35 per cent by buying land and building their own home, compared with what they would have paid for a new build home of similar specification.
But what do amateurs need to know before they start seriously considering converting their dream home into a reality?
Finding land will be your first task. You can find plots by going to estate agents in your preferred area, or driving around looking for seemingly available plots and checking with the Land Registry if they are for sale.
Alternatively, you could use a service such as BuildStore's Plotsearch, which has a national data-base of land available nationwide.
Deciding the kind of house you want is the next step. Novices might think about going for a "packaged home". A company such as Potton or the German firm Huf Haus will build a timber frame in one of their styles or to your individual requirements.
"Alternatively," says John Hay of BuildStore, "you could contact an architect specialising in self-build. Using an architectural technologist will be cheaper, but when using either it's a good idea to know they have experience in self-build. Ask to speak to their former clients or to see other homes they have helped build."
Getting a mortgage comes next. There are two main types of self-build mortgage: those which release cash at different stages of the project, and those which release the cash only at the end. Unless you have considerable capital, the former is probably more appropriate.
Mark Howard of M2 Financial Services (01483 243 593), an independent financial adviser (IFA), has recently completed his second property, a five-bedroom house in Ancaster, Lincolnshire. He financed the project through TheOne Account (08456 000 001, www.oneaccount.co.uk).
He says: "It is important to get a very flexible lender who works with you. Our mortgage allows us to draw out cash as and when we've needed it to fund the build."
You ought to bear in mind the loan to value (LTV) ratio may be lower than the levels available to other borrowers, at perhaps 85 per cent compared with up to 100 per cent on standard mortgages. However, the LTV you are likely to need once the project is finished is likely to be lower than standard borrowers anyway, because of the saving you have made.
You must get comprehensive insurance throughout the build. This should include those working on the site, employer's liability, public liability, insurance for any equipment used, insurance against unforeseen legal expenses, plus caravan insurance if you are living on site.
BuildStore offers a packaged product covering all of the above; a typical premium is about £475.
According to Norwich & Peterborough building society (0845 300 6727, www.norwichandpeterborough.co.uk), which also provides self-build mortgages that release cash in stages, you should be prepared for other costs, including a contingency sum for any unexpected costs over your budget.
Also, lenders including N&P will need a valuation of the property to ensure it is adequate security for the loan. A re-inspection fee may also be charged before the release of each stage payment.
However, there are other savings: you should be able to reclaim VAT if you are doing a self-build project or converting a non-residential property into a home.
In addition, if you are converting a sub-standard property, you will pay stamp duty only on the property in its original state, at its original price.
You can of course, make big savings if you project manage the build yourself. But Mr Howard said this was only advisable if you have a good knowledge the building business.
He added that he would recommend anyone to try self-build for both the sense of achievement and the savings. It cost £85,000 to buy the land in Ancaster, £250,000 to build the property, but it is now valued at about £500,000.
There are self-build shows around the country throughout the rest of this year. Go to www.homebuildingshow.co.uk.
Case study: Dead end plot transformed into a Georgian style paradise
Jeremy Cooke and Jackie Byard-Cooke saw potential for their dream home in what seemed to be a dead end. "We had our son and wanted more space, but we couldn't afford the kind of house we wanted in our area," said Jeremy, 35.
Then the couple, who live in Bawtry near Doncaster, South Yorkshire, saw a patch of land at the dead end of a road. After some wrangling with the land's previous owners, the couple paid about £160,000 for the plot and a four-bedroom Georgian-style house that would have set them back closer to £320,000 if bought as a new build.
They have no regrets, but building their own home was fraught with challenges, including finding a lender. "We were with Nationwide building society for eight years, but they would not lend us the money for the project, so we went with BuildStore," said Jeremy.
Other challenges included doing the wiring and the plumbing themselves. Mr Cooke said: "I own a small engineering firm with my wife and brother, so I'm quite practical, but had no experience with wiring. That said, I managed to do it from a manual and get it checked out by an electrician. With the plumbing we went for a underfloor heating system which was fairly straightforward."
Project managing the build from a caravan on site also proved quite testing and Mr Cooke warns would-be self-builders that such projects are made even tougher if the whole family is not behind it.
The other key lesson was not to underestimate the importance of having a decent contingency fund. "Make sure you have between 15-20 per cent of the total budget to fund the unexpected," said Mr Cooke.
