Everybody wants to own a house with all types of amenities, but to build a home of dreams requires plenty of money.
To manage the finances, people usually go for loans or mortgages. A standard residential mortgage is not the way to go for building a home. For projects like these a self-build mortgage comes into play.
What is a self-build mortgage?
A self-build mortgage is specially designed to help a self-builder to make their own home. In a self-build mortgage, money is released according to the gradual progress of the house.
Types of self-build mortgage –
Arrears type – This type of self-build mortgage is available for those who have a big stock of cash of their own to finance in the project. In this type of mortgage, the money is processed as per the completion of each stage of building.
Advance type mortgage- In this type of self-mortgage, money is released gradually at the start of a particular stage of building.
Pros and cons of self-build mortgage –
The self-building mortgage has both pros and cons respectively.
Pros of a self-build mortgage
- The aim of building a customized property offers an opportunity to save money. Hence, doing a lot of work themselves and collecting materials helps in cutting costs.
- Once the construction is completed, the value of property enhances significantly, even more than the cost price.
- Another advantage of a self-build mortgage is that stamp duty does not apply to the cost of construction work or in the value of the property. Stamp duty applies only to the land or plot.
Cons of a self-build mortgage
- Some lenders require a higher deposit, ranging between 25 to 50 percent for a self-build mortgage.
- With the help of a specialist broker or mortgage specialist, loads of paperwork can be reduced, as they can manage it on behalf of the owner.
- Not many lenders offer the self-build mortgage, so in comparison to a residential mortgage being a more common choice; the choices of rates are lower for a self-build mortgage.
These are the pros and cons of self-build mortgages for home.