In order to build your own home, you will need to buy the land for the home, get planning permission and pay for the materials, an architect and the workers to build it and project manage it. Of course, there is the option to do some of the work yourself if you want to save some extra money, but it could end up taking up more of your time and effort.
Building your own home is often cheaper than buying, so it's quite a surprise that it isn't all that common in the UK.
In fact, the UK has one of the lowest proportions of self-built homes in Europe, and that's partly because it has been so difficult for people to get the necessary financing and planning permission.
However, in recent times the UK government has attempted to improve on this record by making it easier for people to get the financing they need to build their own home.
Mortgages for building your own home are slightly different to the way a regular mortgage works. First of all, self-build mortgage financing is staggered according to the construction plan.
This means that as part of your mortgage you will initially get a portion of the money help to purchase the plot of land. Like a standard mortgage, you will need a deposit to help cover the costs.
You won't receive all of the money in one go. You will get each portion according to each part of the home building process. For example, you will receive another portion at the start of the construction process and another midway through.
Mortgage providers do this to reduce their risk, as plans may change halfway through the construction process. By giving you the money in stages it ensures that you stick to the plan.
The obvious advantage to building your own home is the cost. If planned and executed correctly, then you could save money as the land, building materials, and labour are often cheaper than buying a home outright.
You might also avoid having to pay any Stamp Duty, which could save you thousands of pounds. Stamp Duty Land Tax applies specifically to the land, and the cost of land can often be much cheaper when there's nothing there. Stamp Duty applies on the value of a home over £125,000, but if you're only buying land to build on rather than a ready made property, there's a better chance of you paying less or nothing at all.
Advantages of a self-build home:
Often much cheaper, plus you could save on Stamp Duty
An opportunity to custom design the home to meet your needs
It can be hard searching the property market to find something that suits you perfectly, so building a home yourself might end up being a better solution.
However, there are some disadvantages, including the risk of not being able to manage the project properly and — if you are behind schedule — potentially losing your funding from the mortgage provider.
Disadvantages to a self-build home:
Project management and planning could be difficult — plus there's a risk of losing your financing if it's not all on schedule
Might be hard to find a plot of land that is suitable for you and your home
It might also be difficult to find the right plot of land for what you are hoping to build. Empty space might be empty for good reason, be it too far from local amenities or too close to traffic. You will need to do a fair bit of research to find a plot of land that is right for you and your home.
The risk of building your own home is not doing the proper planning. You could end up with a nice plot of land and the vision for a beautiful home, but if you don't plan correctly you could end up with just an empty field.
It's important to formulate your plan and your budget in advance. The difference between any standard mortgage lender and financing for a self-build home is that on top of the usual affordability checks, they will also want to see your plan, budget and schedule for completing the project.
To alleviate some risk, you should consider adding an extra 10% to your budget as a safety net. Additional costs can always crop up when you least expect them, so it's better to have it accounted for in your budget in advance.
The mortgage or financing is usually provided in around five to seven payments. Your lender may even send someone over to inspect the build to check that it is on schedule before they release more money to you.
You will also need to factor the cost of insurance for the construction as you will be responsible for the safety of the workers and the job site.
You can search the Self Build Portal for available plots of land. You can also search on traditional property search websites, but these are often in short supply. This is usually because land may not always have planning permission.
You may find it easier to get planning permission on the land if you partner with a developer or group scheme that wants to build multiple properties. Planning permission may be harder to get if you are only building one home.
It's important in the research phase to check if the land is likely to receive planning permission first.
Unless you are an architect, you will need to hire one to help you design your home. You should still be able to have a say over what you want done. The architect will at least be able to tell you what's possible and what isn't, considering the budget and the plot of land you're building on.
You will also need to hire builders, including carpenters, plumbers, and electricians. Some people who self-build already have extensive experience in one of the building trades, so they can either help oversee some of the project or do some of the work. Even so, it is likely you will need to pay for some additional tradespeople to help with the work.
Once the build is complete, you will need to make sure the work has been safely carried out and gas has been fitted by certified workers, and that your new home is safe to be lived in.