New-build homes are a divisive subject in Britain.
While some buyers love the idea of a blank canvas and the simplicity of buying a property with no chain, others think they have a ‘cookie cutter’ design and are not built to last.
For those who think they could do a better job themselves, building your own home may just have become a little easier.
Custom build: This home in Northamptonshire was built by a customer of the custom-build developer Potton. They spent £690,000 on the land and build costs and it was valued at £820,000 when it completed in March 2019
In a move that could help turn people’s Grand Designs dreams into reality, the Government recently announced £150million of funding to make it easier and cheaper to ‘self-build,’ particularly for those who don’t have big deposits.
It says 30,000 to 40,000 households could use the scheme, known as Help to Build, each year. It will be available later in the summer and the full details haven’t been revealed.
‘The Help to Build scheme is an important step towards greater customer choice for those with ambition, sound plans and smaller deposits,’ says Andrew Baddeley-Chappell, chief executive of industry body the National Custom and Self Build Association.
He adds: ‘Custom and self-build is about the homeowner having control over the design and specification of their project – enabling them to create the home they want, rather than the one someone else believes they would like.’
Self-building might offer the chance to create home that fits with your lifestyle – but it is also a complex process, both practically and financially.
We explain the different options available, and what you need to consider before taking the plunge.
‘We wanted a home that was personalised to us’
Three years ago, Frances Gayne and her husband worked with Fernham Homes to create their dream custom-built home in Wildernesse Avenue, Sevenoaks, Kent.
‘We really wanted something a little more individual – in making such a large investment we were keen to be able to personalise the finishes,’ she says.
‘We had considered a self-build project, but it was almost impossible to find the right plot in Sevenoaks.
‘We were able to amend the floor plans to make some important changes, and I acted as the project manager working with the team to create the perfect house for us.
‘For example, the original design had two downstairs toilets, which we just didn’t need, so we were able to create a sizeable laundry room, which for us was a much better use of space. We also removed the kitchenette that was planned for the top floor.
‘It was critical for us to be able to choose the finishes, for example, we now have beautiful stone flooring throughout the entrance hall and kitchen. I was also able to have input on the exact layout of the bathroom and plans for the kitchen design.
‘It was a brilliant partnership that worked well, with the builders doing what they do best.
‘Having a good relationship with your builder is worth its weight in gold, and we knew right from the start that we were in safe hands.’
An example of a Fernham Homes custom build property. This is in their Hillside Park development in the village of Linton near Maidstone in Kent
What exactly is self-build? Do I have to do the construction work myself?
The name is something of a misnomer, as plenty of those who self-build don’t get their hands dirty at all.
Self-building is when, instead of buying a new home that has been built by a developer, you purchase a plot of land, or a renovation project, and hire contractors to design and build it for you based on your own specifications.
‘If you’re looking to build a property, there are specialist platforms which allow you to search for land plots, and many portals such as Rightmove now also let you filter for this,’ says Matt Coulson, director at mortgage broker Heron Financial.
‘Additionally, it’s worth checking your local council’s planning portals for planning applications, as many landowners will obtain permission before selling in order to make them more attractive.’
Some home owners act as the project manager or even get involved in the construction, but it isn’t recommended unless you have the proper skills and experience. Your mortgage lender, for example, would want proof of this.
As well as buying a plot, another option is to build on the site of your existing home.
A third of UK homeowners would give up part of their garden to build their own new house, according to a recent survey by specialist lender Together.
‘It’s important that homeowners have enough space and get any required building consent, including planning permission, before they take on a self-build,’ says Scott Clay, distribution manager at Together.
‘They will also need a lot of planning, determination, and the right finance in place before they start their project.’
This is another Potton custom-build development, located in Nottinghamshire. This customer spent £545,000 on the land and build costs, and it was valued at £700,000 in 2017
If you want a more bespoke home, but organising everything yourself seems daunting, custom build could be for you.
This is where a developer will sell you a pre-prepared plot with planning permission, and then build the home for you with some level of customisation.
For example, you might get to choose the number of bedrooms, internal layout or materials used.
What costs do I need to budget for?
There is a reason that over-spending has become a cliché on Grand Designs, as one of the biggest challenges when building a home is keeping within your budget.
You’re not just paying for labour and materials: you will also need to buy the plot, and pay for planning advice and applications, architects, insurance and warranties among other things.
How much will I spend on my new home?
According to research by the website Homebuilding & Renovating in summer 2020, the average self-builder spent a median average of:
£190,000 on the plot
£270,000 on the build
The average market value of their finished home was £500,000
Looking at the build cost by square metres, there was a huge variation from £300/m² to more than £5,000/m²
Costs can quickly spiral if the project takes longer than expected, or if construction issues come up that you didn’t plan for.
‘It’s vital to have a clear detailed plan of your funding, as well as the practicalities of building your own home,’ explains Brian Murphy, head of lending at the Mortgage Advice Bureau.
‘For your costs, things you’ll need to think about include planning permission, architectural or project management costs, a building regulation completion certificate, site insurance, a self-build warranty, as well as the costs of materials you’re planning to use, to name a few.’
You will also need somewhere to live while you complete the project – whether that means staying in your current residence, which could impact your borrowing capacity, or in a caravan on site.
However, there are some tax benefits. For example, you can apply for a VAT refund on building materials and services from HMRC within three months of completing the project.
Your location options might be limited
Although it is growing, the self-build industry is still relatively small, which can make the whole process more challenging – from finding a plot to hiring tradesmen who can carry out your vision.
If you are going down the custom build route, for example, you might find that your location options are limited because there aren’t that many developers in the market.
‘There are very few specialist custom-build developers currently operating,’ says Scott Winnard, partner and joint head of land development at chartered surveyors Bruton Knowles.
Hiring an architect to work up plans is just one of the costs associated with a self-build
‘Self-build plots need to be delivered, not just on parcels within housing estates but also smaller bespoke sites.
‘Self-builders are looking for attractive sites, and a corner within a generic housing estate is not the answer.’
Planning permission can be a challenge
Obtaining planning permission can be a big hurdle, especially as many self-builders want to build in rural areas where developments can face tough opposition.
There currently aren’t any special exceptions for people who are self-building, so you will need to go through many of the same processes as a large house builder.
‘In theory [Help to Build] is a great idea but practically, the only way it will work is if planning policy makes it easier to achieve planning,’ says Winnard. ‘We don’t currently have planning consents targeted to deliver custom builds.’
As a self-builder, you also foot the cost of a planning application yourself – and if you aren’t an expert, you may need to hire a consultant to help you understand the intricacies of the process.
‘Unless you are incredibly lucky, almost all proposals for new builds are opposed by local residents,’ says Ben Dyer, chief executive of the app for tradesmen, Powered Now.
‘As local authority planning departments well know, if merely the fact of having opposition prevented building, then nothing would ever get built. But local residents know this, so they tend to become quite creative.
‘For example, a large number of them turn out to be surprisingly concerned about the welfare of the local wildlife, such as bats and newts.’
Can I get a normal mortgage?
When you’re building a home, you need the cash to pay for different parts of the job at different times, so a normal mortgage isn’t going to work.
The good news is that there are specialist self-build mortgages that allow you to release funds over a period of time, either in arrears or in advance.
Some self-builders might decide to get stuck in and help with the construction process – but your mortgage lender will want to know that you have the proper experience and skills
If your lender is paying you in arrears, you will need your own savings available to pay for materials and labour up front.
‘Self-build mortgages by their nature are a lot more complicated than traditional ones, working by releasing the money in stages linked to inspections by a surveyor during the build process,’ explains Coulson.
‘We recommend speaking with a specialist broker, as there are various requirements that go further than a typical mortgage application and they will be able to advise you on how they work, what information is needed for your application, and what level of deposit is required before getting your builders’ quotes.’
Typically, borrowers seeking to embark on a self-build need a higher deposit than those buying a home in the usual way.
‘Anyone can apply for a self-build mortgage, but it’s not uncommon for these specialist products to require a higher deposit,’ explains Murphy.
‘Ultimately it depends on the lender and your type of project, but as lenders can be more cautious when it comes to self-build projects, be prepared to pay a higher upfront cost compared to a residential mortgage.’
However, Help to Build would appear to offer a solution to this problem for those who qualify.
‘I want to design my own home’
Architect Elliott Deevy, 26, says finances have been a barrier to designing a home for him and his girlfriend
Elliott Deevy, 26, works as a freelance architect from his parents’ house, but would love to build a home for him and his girlfriend.
Although he has signed up to his local authority’s self-build register, financial issues have meant that self-building has remained an aspiration.
‘Right now it feels impossible, and I don’t want a market new build as the homes on offer are low-quality or really generic,’ he says.
For Elliott, renting seems like an expensive option that he thinks he will end up ‘being trapped in forever’.
He says that the Help to Build scheme could make his dream possible, as he could secure a 5 per cent deposit with help from his parents and by using savings.
‘I hope to design my own home which would be of a better quality than what a developer would build; something that is personal to me, as well as being sustainable,’ he says. ‘I really just need some sort of financial help to make this happen.
‘Such a loan scheme would create an opportunity for young people to escape renting without having to buy an expensive, generic home from a developer.’
‘We want to build a home that fits our extended family under one roof’
Linda and her husband Terry raised their seven children in a Hampshire village, where they bought their home from the local authority.
But they then sold up and moved in with her parents, who needed more support as they got older.
‘This means that my husband and I and our grown son, who is autistic and lives with us, are squeezed into my parent’s house. Clearly this not ideal for three generations of adults,’ says Linda.
Linda and Terry had the idea of pooling resources to buy a large home that they could convert into flats. This would mean they, their son and their parents could live together, but independently.
But having been gazumped several times and with prices rising, they could no longer afford to return to the village where their friends and other family members lived.
‘That’s when we heard of a discounted self-build scheme that was being developed in the village of Bishops Waltham, specifically for people with a local connection but who were otherwise priced out of the market,’ says Linda.
‘This seems to be the perfect solution, and we hope we can build a home that meets the needs of our three generations.’
However, finance remains a problem, even with equity from the sale of their home. A Help to Build loan would help the extended family bridge the gap.
‘It would be such a relief to be able build a forever home that would meet our needs, and that would give us a base in the community where we used to live, and I still work,’ says Linda.
‘Being together in a home that meets our needs would make such a difference to the quality of our lives.’
How will the new funding work?
The Government’s funding will be provided through the Help to Build equity loan scheme, which works in a similar way to the Help to Buy equity loan scheme for first-time buyers.
People wanting to build their own home will be able to take out government loans to put towards their deposit.
Having more money up front will allow them to access better mortgage rates, and putting the loan towards their deposit will free up more of their own money to spend on build costs.
Help to Build loans will be available later this summer and the scheme is expected to last for four years.
Further details of how the loan scheme will work have not been confirmed.
However, the National Custom and Self Build Association has previously suggested a model where the customer would take out a specialist self-build mortgage with a 5 per cent deposit, with the mortgage lender providing the other 95 per cent of funding for the project.
On completion of the build, the Government would pay 20 per cent of the build cost to the lender, reducing the mortgage value to 75 per cent and thus lowering the customer’s interest payments.
The customer would then need to pay back the money to the Government, perhaps at a preferential interest rate.
Under the original Help to Buy scheme, for example, buyers paid no interest on the loan for the first five years, then paid a rate of 1.75 per cent, which increased by RPI plus 1 per cent each year.
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