How do I fund my project?
Most selfbuilders need a mortgage to finance their project. Mortgages, however, are granted on the basis of equity. That obviously doesn’t exist when you only have a building plot. The majority of self-build mortgages are therefore funded on the completion of various stages of the build, typically four or five.
This means 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.
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 Buildstore, which provide stage payments in advance and allow you to remain in your home until your new house is completed.
Information on the requirements of current lenders is published in the SelfBuild & Design Mortgage Table, published 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 a useful, short-term back up.
What about unexpected costs?
A 15 per cent contingency fund is recommended. A final word of warning: costs per square metre estimates work best for developers, building multiple units on the same site. Selfbuilders with one-off projects aren’t nearly so lucky. Costs can vary wildly depending on ground conditions, complexity of the build, and the ability of the project manager to negotiate on labour and materials.