Organising Finances

Most people obtain a mortgage to finance their project. Mortgages, however, are granted on the basis of collateral. That obviously doesn't exist when all you have is a building plot. Self build mortgages are therefore often funded on the completion of various stages of the build, typically four or five.

This means, of course, that you need to be able to fund stages, either from your own resources or other borrowing, before you are reimbursed by the next payment from your main lender. In the case of a timber-frame house, where the frame might account for a third of your total budget - payable in one go - this is likely to require careful juggling of finances.

Always establish clearly with your lender when and how stage payments will be made so you don't find yourself running into cash flow problems and perhaps losing a reliable subcontractor. One solution is to raise a loan on your existing home, to be re-paid when you sell it.

There are also schemes like the Accelerator mortgage from self build finance specialist Buildstore, which releases money at the beginning of each stage rather than at the end, and does not necessarily rely on mortgage valuations to release funds, which is a requirement for many self build stage-payment mortgages. Information on the requirements of current lenders is published in our Finance page, which features in the magazine every month.

Another way of managing cash flow is to open an account with a builder's merchant. Thirty days' payment is common and provides a welcome respite when cash is tight. Clear your credit cards, too, before you start. They are useful, short-term back up.