A Guide to Financing Your DIY Building Project
by Andrew Carrier, Senior Commercial Solicitor
We have all seen the TV show where people are trying to create their dream house with a DIY building project, frequently running into problems or running over budget. However, these are not the only issues you may encounter, you may find that securing finance for a self-build may not be so easy from a regular mortgage provider.
If you are new to self builds, or thinking about getting into it for the first -time, it’s useful to consult a specialist mortgage lender – even if you don’t go on to take up an offer of finance. There are a number of specialist lenders in the market and they can provide invaluable help in the early stages of a project.
We can’t recommend any particular lender but clients looking for a lender to help with a DIY building project may find it helpful to seek finance from a self-build specialist who will offer a mortgage that releases funds in stages. Some mortgage lenders will release funds to purchase the land with outline planning permission, and will then lend further funds for the cost of building once detailed planning is in place. Apart from the usual information any lender will want, such as proof of identity and finance for any deposit, Fraser Dawbarns would recommend also having the following information ready at the start of the loan application process:
- Planning permission
- Initial Building Regulations approval
- Architect’s drawings
- Details of the build and the builder
- Costings and a cashflow forecast
- NHBC or equivalent new home insurance
The brief checklist summarised here is just the start of the mortgage process. If you decide to move on to the next stage, all lenders will expect a financial commitment from you, possibly an arrangement fee and a valuation fee. The lender’s valuer will give the lender a list of further requirements and recommendations that will be invaluable to you as part of your own project checklist.
Finally, every lender will have a checklist of legal requirements. Some lenders insist on a separate solicitor representing lender and borrower but others will use the same solicitor as you instruct. It is worth being aware that separate representation will mean double the legal bill, so it is important to check with your lender whether they will stipulate this requirement. Your solicitor can then help pull the project together, identify any legal constraints that may affect the development and, ultimately, secure your mortgage funds.
In summary, a specialist DIY house build mortgage lender will provide you with a wealth of information that can prove to be invaluably helpful at the start of a potentially daunting project and if you have been able to secure mortgage finance then you must be doing something right!