Making the right decision on finances for your self build project.
In order to build your house you first need to make sure that you have your finances arranged and ready to start. Some people already have the capital they need through the sale of the previous house or through personal means, but for most people they need to arrange a mortgage from a lending institute.
Do remember that not everyone qualifies for a mortgage as there are some criteria’s that you have to meet before any of the institutes are prepared to lend you the money. Each institute has their own criteria but most of them involve your status which has to do with your past credit history, your income and the amount of money you are applying for as a mortgage.
The Following is a guide on the basic criteria that will be needed by the institutes to asses your finances:
- The first thing that they will be looking at in your finances is your previous credit history to find out if you are a good risk for them. So, if you have a county court judgement (CCJ) against you for non payment or bad debt and bankruptcy, the chances are that you will not be getting the mortgage, or if you do it might be at a very high rates and conditions.
- The next thing would be your income to make sure that you can afford the repayments on the mortgage. This is usually done by the institutes on the basis of multiples and the amount of the loan. For example, your mortgage amount could be based on 3 to 4 times your gross single income or 2.5 to 3.5 times gross joint income. As an employed person you need to produce your p.60 as a proof of income and as self employed you need to have your accountant to provide prove of your previous 2 to 3 years taxable income.
- Lending institutes usually lend up to 90 to 95% of the value of the property so you need to make sure that you have enough money to put down as a deposit as well as enough for other expenses, including solicitors, stamp duty, valuation and other fees.
- Do remember that for a self builder some institutes only lend based on stage payments which means that as you finish different stages of the build they make the next payment.
If you qualify the criteria of the lending institute then you have to decide on the type of the mortgage and the term.