Self and Custom Build Funding Options
There are various routes that can be pursued from completely self-financed, to the more traditional route of obtaining self build mortgage finance. In addition the Scottish Government has launched the Self Build Loan Fund in order to provide finance to self builders who cannot access main stream self build mortgage finance.
Read more about the different funding options below.
Self-build Mortgage Finance (bridging finance)
The market for self build mortgage finance is very restricted, with limited number of lenders who will operate in the Scottish mortgage market.
A self build mortgage typically takes the form of stage payments unlike a more traditional mortgage where the loan is given in a single lump sum. The reason for this is so the lenders can reduce their risk by ensuring that the money is being spent in accordance with the build plans and people do not run out or over spend before their build is finished.
Terms vary by lender, as do timeframes for releasing the payouts. A typical self build mortgage is as follows:
First payout - when you purchase your land.
Another payout – when the foundations are established.
Another payout – when the property is built to roof level.
Another payout – when the roof is secured and watertight and the walls inside the property are airtight.
Final payout – when the build is complete.
Whilst there are limited self build mortgage lenders, a mortgage broker can access a wider range of finance that is not available from high street branches. A range of self build mortgage products are only available via broker who can also access other bridging finance routes.
Scottish Government’s Self Build Loan Fund
The Scottish Government have launched the Self Build Loan Fund (SBLF) to assist where it has not been possible to obtain self-build finance from the main stream lenders, either directly or via mortgage broker. The scheme can potentially provide assistance whereby self build mortgage finance has been sought but declined, but the finished build would secure mainstream mortgage finance.
The Highlands Small Communities Housing Trust (HSCHT) have been assigned as the agents for the SBLF. Successful applicants will be able to borrow up to £175,000 to help them with their build.
For more information and how to apply visit HSCHT’s website:
The Dr and Mrs J. Stevens Faulds Fund
The family and friends of Dr J. Steven and Mrs May Faulds have created a fund in their memory to help individuals and families access affordable self-build housing plots across rural Scotland. The fund will help those who are eligible to purchase a plot of land so they can build their own home. The Highlands Small Communities Housing Trust (HSCHT) are administering the fund on behalf of those who created it.
If you wish to build a home but have not been able compete to purchase a house plot on the open market, this fund may be able to assist you. To be eligible, applicants must be able to demonstrate:
- A permanent connection to the local community i.e. family or personal connection, employment
- They have experienced difficulties in securing housing opportunities that meet the accommodation needs of their household
- They are able to meet the costs of developing the plot; and
- They have a clear understanding of the nature and limitations of the Rural Housing Burden
Applicants to the fund will be prioritised in the following order:
- Scottish Island Applications
- Applicants from a remote rural location with a population of less than 500 people
- Applicants from an accessible rural location with a population of less than 500 people
- Applicants in social rented housing, insecure tenancies or unsuitable housing
- A register of interest will be held by HSCHT, who will be in touch with applicants if a house plot becomes available for them in their preferred location.
For more information visit HSCHT’s website: www.hscht.co.uk/dr-and-mrs-j-steven-faulds-memorial-fund.html
A relative may wish to gift you money to help you with your costs. A thoughtful act that can really help those struggling to fund their self-build. However, it must be noted that gifts of money may be subject to inheritance tax. To find out more about inheritance tax look here: www.gov.uk/inheritance-tax