It has recently come to my attention that those looking to buy a plot of land and undertake the build themselves are now able to part fund the deal through finance from Spanish Banks....
When buying building plots many clients and agents for that matter are unclear on the real buying costs with different tax implications and varied build and service connection costs for a project. These are nearly always higher than the client allows for and can often be a factor as to why they cannot proceed with a Plot & Build option if not priced in from the outset seeing them being pushed over their total budget.
One way around this that can often help keep a deal alive is to introduce SELF BUILD FINANCING, something that is now available in Spain and can actually amount to 100% of the build costs when approached correctly.
This is something that can either be kept in the locker as back up should the budget get squeezed a bit too tight and they have their hearts set on a certain plot or to increase a clients options on availability....
....So what are self-build mortgages?
As the name suggests, a self-build mortgage is a home loan taken out on a property which you are building yourself.
The biggest difference between self-build mortgages and standard residential mortgages is that the funds are given to you in stages rather than as a single lump sum. This is to reduce the lender's risk and ensure that the money is spent as planned so you don't run out when you are only half way through the project.
Exactly when funds are released will depend on the lender but, as a general rule, you'll get the first tranche when you buy the land, more when the foundations are laid and a further payment when the property is built up to eaves level.
The final payments will usually be made when the roof is watertight and then when the interior walls are plastered.
What types of self-build mortgages are available?
With most self-build mortgages, the money for each stage is usually only paid out once it has been completed and a valuer has visited the site.
However, some self-build mortgages release the money required for each stage of the build at the beginning rather than the end of the stage. This is particularly useful if you don't have the cash up front to pay your builders or to buy materials plus you pay ‘interest only’ on the actual amount lent up until the completion of the build and only then it reverts to a repayment type loan.
Rates on self-build mortgages tend to be higher than on standard mortgages, so it pays to seek the right advice, something that can be discussed with me directly...
What are the advantages of self-build mortgages?
The beauty of this type of loan is it is 'interest only' until the completion when it reverts to a repayment loan and as it is released in instalments they only pay interest on the amounts as they are received.
The potential financial gains from building your own home are the other main advantage. Often self-builders find their finished property is worth much more than it cost them to construct.
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