Self-build mortgages have become increasingly popular in recent years, as homeowners look to find more financially efficient ways to increase their living space. Resultantly, we are often approached by clients looking for advice in this area.
A recent case of mine clearly illustrates this trend. My clients were a successful married couple who were essentially looking to double the square footage of their property and create a beautiful family home.
As it stood, their home was valued at £1million, and they had a mortgage of £560,000 with a high-street lender. They hoped to knock this property down and rent elsewhere temporarily, whilst rebuilding the property from scratch. This would enable them to increase the number of bedrooms and reception rooms, refurbish completely, and significantly increase the value of the property. As this would be a very high-end finish, they expected the final development value to be in the region of £2million.
However, self-build mortgages are not as straightforward as residential finance, so they approached me for advice.
I was able to advise them of a lender who focuses heavily on their self-build mortgage offering. This lender was able to offer a 75% loan to value (LTV) on the property’s existing value, which would release £750,000. This amount could be used to pay off the existing mortgage, with the remainder being added to my client’s savings, creating a good pot of money to begin the build.
Better yet, this lender is able to release more funds up to 75% LTV as the build progresses, meaning that the final facility would be stress tested at 75% of the Gross Development Value, expected to be £2million. This is an unusual approach but one which was very suited to my clients, who ultimately expected to borrow up to the region of £1.5million.
This facility was offered at a rate of 4.19% with a 2% arrangement fee. When the build is complete, my clients will then be able to remortgage onto a residential rate and enjoy their new home.
If you are looking for a high-value self-build mortgage, there are several options—the key is getting exactly the right advice for your circumstances. If you would like to know more about financing the build of your dream home, I am experienced in this area and would be happy to advise you further.