Category Archives: self building first time buyers

 

18 
Feb

Why would you need a self-build structural warranty?

why you need a self build structural warranty

It may be easier to simply buy a new-build property, but many people dream of designing their own home. Self-build projects take a lot of time, effort, and money, but the reward of a totally customised residence is often worth it.

However, it’s crucial to ensure that such a big investment has the right financial protections in place from the start – including building site insurance and a structural warranty.

If you’re not sure whether a self-build structural warranty is necessary, or you don’t understand the difference between this policy and self-build site insurance, then this article is for you.

Read on to learn more about why both policies are essential for any successful and long-lasting self-build home.

What is a self-build structural warranty?

Just as a standard structural warranty protects a building development during construction, and for a further ten years after completion of the project, the same applies for a self-build warranty.

The only difference is that rather than a developer or builder taking out the policy and passing it on to the eventual buyer, you would take out the warranty yourself as the builder of your own home.

Whether you participate in the design and construction or hire contractors to handle everything on your behalf, you’d still take the position and responsibility that a developer would.

When you take out a self-build structural warranty, the provider will carry out regular inspections throughout the building process, ensuring that any structural problems are caught and fixed as early as possible.

After your self-build home is completed and signed off, the ten year structural warranty will kick in from the date on the completion certificate. You’ll then have the assurance that you won’t be out of pocket if any latent structural defects show up over the next several years.

The contractors are directly responsible for the first two years, then the warranty provider will handle claims for the remainder.

A thorough structural warranty should cover defects due to poor design or workmanship and faulty materials or components.

This isn’t the same as home insurance, which you’ll need to arrange when you move in to protect your self-build from theft and accidental damage – which the warranty doesn’t cover.

Why would I need a self-build warranty?

So, why is it so important to get a self-build warranty before starting to build your own home? Here are five reasons to secure a structural warranty as early as possible in the self-build process:

1) Quality control – even if you have experience as a project manager, it always helps to get another pair of expert eyes and an impartial opinion on the proceedings.

2) Holding contractors liable – you can’t just rely on the contractor’s insurance, as it’s designed to protect them and not you, whereas your own warranty protects your investment.

3) Peace of mind – the last thing you want is an expensive and time-consuming legal battle if a fault occurs, but the warranty allows you to claim repair costs without litigation.

4) Raising finance – if you’re taking out a loan to fund your project, the bank is likely to require adequate insurance before offering you a mortgage.

5) Selling your home – in the event you end up selling your self-build within ten years, a buyer will also want a warranty for their own mortgage and peace of mind.

One of the biggest issues is funding the project. Unless you already have the money to pay for your self-build upfront, you’ll probably need a stage payment loan – which you’ll find hard to get without a structural warranty.

Even if you do pay for everything yourself, you’ll want a structural warranty in case latent defects develop, so you’re not left to foot the bill for repairs or replacements as well.

To clarify, a structural warranty is also not the same as buildings insurance, which is a type of home insurance alongside contents insurance. You’ll only need those once the building is complete and you’ve moved in, as these policies have different coverage that doesn’t include structural defects.

Do I need self-build site insurance as well?

Whether you do the work yourself or appoint a contractor or builder to do it for you, you must have the right site insurance for the project. Of course, any third parties need their own insurance policies, but you can’t rely on those to protect you financially.

You should secure site insurance as soon as you purchase a plot of land for the self-build, ahead of getting your structural warranty before construction actually begins.

As the owner and overseer of the site and project, you’ll need employers’ liability insurance to cover accidents and injuries for any workers you employ. This is the only type of site insurance that’s actually compulsory by law.

However, it’s a good idea to have policies that cover these things, too:

  • Public liability – in case a member of the public experiences an accident/injury on your site
  • Contract works – if you have to repair or replace property or tools due to damage or theft

Depending on the extent of your contract works insurance, you might need specific cover for the tools being used and stored on your self-build site. This could be owned plant or hired-in plant, plus any other materials insurance.

You’ll need self-build insurance for your building site from the start of construction to completion – though you may be able to extend the cover if the project overruns.

Just as most lenders require the reassurance of a structural warranty for any new build property, they’ll also require you to have the proper self-build site insurance throughout construction. Banks won’t just accept your contractor’s warranty – you’ll need your own cover to secure a mortgage.

How can I get a self-build warranty?

While you’ll be more focused on setting up self-build site insurance at the start, you should apply for a self-build structural warranty a few weeks before construction is due to begin. This is because your warranty provider needs to carry out regular inspections throughout the duration of the build.

The site insurance will cover your structure, equipment, workers, and public liability until the self-build is complete, for the period agreed upon with the provider. The structural warranty will then cover your new home against latent structural defects for the next ten years from completion.

Here at Architects Certificate, we’re proud to offer a widely accepted ten year structural warranty for a variety of property types. Our ABC+ Warranty can also apply to self-build homes, so don’t hesitate to get in touch for a quote if you’re searching for a self-build structural warranty provider.

If you’d like to discuss your project specifications with our team and find out more about the self-build cover we offer, please call us on 0161 928 8804 or email info@architectscertificate.co.uk.

We’ll be happy to guide you through the process of applying for a self-build structural warranty.

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Published Date: 18th February 2022
Category: ABC+ warranty, Contractors all risk insurance, Home warranty, self building first time buyers, structural warranty


 

17 
Nov

How do stage payments work for self-builds?

self build stage payments

Self-build mortgages and stage payments

Searching for the right property can be a long and stressful process. Even when a particular home seems promising, you’ll probably find that your location, design, and price ideals rarely align.

The alternative is to build your own home instead of buying a pre-built property. This allows you to tailor every aspect to your personal needs and preferences – with guidance from the experts.

You could try to do most of it yourself (if you have the experience and qualifications to carry out building work). Or, you could hire an architect and builders to take care of things for you.

The last option, for those who want a hands-off experience, is hiring a contractor to sort everything out on your behalf. However, this approach is obviously going to be more expensive.

Whichever self-build route you take, it’s likely that you’ll need a mortgage to finance the project. After all, most of us don’t have the funds to build an entire house just sitting around.

Standard mortgages are for newly-built properties, so you’ll need a specialist mortgage. Let’s take a look into stage payment mortgages and how they can help you to self-build your dream home.

What is a stage payment mortgage?

Banks tend to release standard mortgage funds once a property sale completes.. Mortgages for self-builds are different. They release payments in instalments instead of a lump sum, across multiple stages of the building process.

This type of mortgage allows you to borrow money to buy land to build on first, then pay for the construction in stages as it progresses. It’s helpful for managing cashflow if you don’t have the funds to pay for the project upfront yourself.

Since it’s a specialist loan, there are fewer providers to choose from than for standard mortgages. The stage payments reduce the lender’s risk, as there’s more room for error with self-builds if they aren’t managed properly.

What types of self-build mortgages are there?

There are typically two self-build or stage payment mortgages available: advance and arrears.

Advance mortgages allow you to draw the funds ahead of each stage to fund each part of the project. They usually cover up to 75% of the value, so the deposit will be around 25%.

Arrears mortgages only release payments after the completion of each stage. This means you have to fund each stage yourself first, then the mortgage instalments will essentially repay you. You’ll also have to pay a larger deposit of up to 50%, as this type covers less of the value.

Self-build mortgage loan amounts depend on whether they’re cost-based or valuation-based. This means the stage payments are based on either a portion of the project costs or the value of the project at each stage – usually, whichever is lower.

How much are self-build mortgages?

Each potential lender will assess your financial circumstances (income, outgoings, and debts) and your project planning to establish how much they want to lend you. The more prepared you are, with accurate cost projections, the more likely they are to approve your self-build loan.

Interest rates for these mortgages are higher than standard rates due to the higher risk involved for the lender. They tend to be around 4-6% per annum. However, some lenders will reduce the interest rate later in the build when the property is habitable.

Depending on the lender and particular mortgage, you may be ‘tied in’ to this loan for 1-3 years. Self-build homes typically take at least a year to complete. Once you have a Building Control Completion Certificate, you may be able to switch to lower interest.

Why choose a self-build mortgage?

There are many advantages to self-build mortgages. They enable you to make regular payments to your contractor or purchase materials as needed. Since you only take an instalment, this keeps your monthly interest payments lower than if you had to pay interest on the total amount from day 1.

Of course, the main draw of these mortgages is that they enable you to design your ideal home. Rather than buying a new build in a cookie-cutter development, you can customise everything exactly how you want it. The final product often has a higher property value than it costs to build.

The higher deposits and interest rates are the main downside, as you still have to cover your living costs elsewhere throughout the build. It also requires much more paperwork in preparation. You need planning permission and project cost evaluations ready before you can even apply.

On the plus side, there’s the potential of saving thousands of pounds in Stamp Duty. While this tax has increased when buying completed builds, you can get around this with a self-build. You’ll only have to pay Stamp Duty on the land that you bought to build your home on, not the building itself.

How do stage payment mortgages work?

Understandably, you want to know when you’ll receive the mortgage payments. The lender will normally only release the stage payments after receiving a satisfactory report at each stage. Your supervising architect or the lender’s property valuer will complete regular inspections.

Many lenders won’t offer a mortgage on a land purchase only, and will only release the first payment once the foundations have been laid and inspected. The regular inspections will allow the lender to monitor your progress, and ensure you’re staying on track with the project plan.

Most banks will permit Architect’s Certificates as proof of the status of a building project in order to release the funds. Prior to the final payment, you must provide a copy of a Professional Consultant’s Certificate (PCC) to confirm the property’s completion.

When are the stage payments released?

The key stages for self-build mortgage instalments may vary according to the lender, but they tend to follow this pattern:

  • Purchase of land (with planning permission outline)
  • Substructure completion (site clearance and foundations)
  • Building of load-bearing elements (wall plates, floor joists, roof trusses)
  • Wind and watertight proofing (completed external walls, roofs, windows)
  • First fix (ventilation, plumbing, electrical wiring, internal joinery)
  • Second fix (plastering, final fittings and connections for the above)
  • Certified completion (with a Professional Consultant’s Certificate)

These can vary according to the type of build, as ‘brick and block’ construction is different to timber frame construction. Renovations, such as barn conversions, are also completely different to self-builds from the ground up on empty land.

What do I need to apply for a self-build mortgage?

Self-build mortgage criteria will vary from lender to lender, so you’ll need to double-check their specific requirements before applying. Some require working to a fixed budget, and you may have to include contingency costs of up to 20% in your build cost estimates.

The criteria usually depend on the build type and location, but you will obviously need to comply with current Building Regulations at all times. You’ll need to identify or estimate the costs for:

  • Purchasing the land
  • Obtaining planning permission
  • Project management (e.g. health and safety compliance)
  • Site preparation (e.g. demolition, landscaping)
  • Architectural design fees
  • Construction costs (based on drawing specifications)

When applying for the mortgage, you’ll need to provide copies of the relevant documentation. This includes fixed-price contracts for architect’s and builder’s work, if applicable. The bank can take up to 3 months to process this while they investigate your paperwork and finances.

You must be able to prove that the construction project is registered with the HB47 Scheme, or that it will be supervised from start to finish by a qualified architect or building surveyor. In the latter case, they must have certification for adequate professional indemnity insurance.

You’ll also need an appropriate building insurance policy and structural warranty. Please be aware that these are not the same thing, and banks usually require prospective borrowers to have both in place. These legal protections should give you peace of mind, as well as the lender.

Contact us for Stage Payment Certificates

When you take out a self-build loan, the lender will expect an initial evaluation at the beginning, interim evaluations throughout the project, and a final evaluation on completion. To prove to the bank that everything is proceeding as planned, you’ll need Stage Payment Certificates.

Also known as interim certificates, or pay as you build’ certificates, you won’t be able to receive the funds and pay contractors without them. Luckily, the ABC+ Warranty team at Architects Certificate can provide these all-important documents for your self-build project.

Simply get in touch and we can ensure that due diligence is done for your self-build construction. You can call us on 0161 928 8804 or send enquiries via email to info@architectscertificate.co.uk. We’ll be happy to advise you on Stage Payment Certificates for your project.

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Published Date: 17th November 2021
Category: ABC+ warranty, architects certificates, building warranty, self build checklist, self building first time buyers, structural warranty
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16 
May

Can you get a mortgage on the house you are building?

self build

Securing a mortgage for a new build house can sometimes be difficult, especially if the developer is still constructing the property. If you’re only a buyer and not a builder, the person or company in charge of the construction project should already have a 10 Year Structural Warranty in place.

As the buyer, this policy will protect you against the builder going out of business during the build, then pass onto you when the new build is complete. This will then provide financial security against latent structural defects for the next 10 years. If the developer doesn’t have one of these policies, or you buy after completion, the alternative option is a 6 Year Professional Consultants Certificate.

Since getting a mortgage involves a financial institution taking the risk of investing in your property purchase, most banks and building societies will expect there to be some kind of official guarantee that the new build is structurally sound and in compliance with building and safety regulations.

This is why it’s often worth ‘shopping around’ for a suitable home structural warranty, especially for small builders and self-builders. While NHBC is one of the best-known providers, it’s not always the most affordable or the best deal. So, if you’re looking for an alternative UK Finance-approved policy, to help you get a mortgage for the home you’re building, why not consider our ABC+ Warranty?

Can you get a mortgage to build a house?

Yes, you can. Unless you’re able to finance the build yourself from your savings, selling assets, or another type of loan from your family or the government, then it’s likely you’ll need to apply for a self-build mortgage. Standard residential mortgages usually apply to completed new builds, with the money released in a lump sum at the end, whereas the process for a self-build is very different.

Whether you’re in the planning stages after buying a plot of land to build a house on, or you’re converting or renovating an existing structure like a barn, there’s sure to be a structural warranty that suits your situation – which will then help you to secure funding in the form of a mortgage.

If you’re a first-time builder or buyer, banks and other lenders may be cautious and reduce the amount you can borrow. Since self-build mortgages tend to be released in stage payments to help you finance each step of the project, you need to be in the best possible position financially to get the most from the lender – including having the protection of a structural warranty and good credit.

There are different types of self-builds, depending on the level of involvement you have in the actual construction. For example, you could design the home and participate in building it, or design it all then hire a contractor to do the construction work – or even buy a partially-finished property from a developer and complete the build yourself. The way you do it will affect your mortgage eligibility.

The best approach is to work with a qualified builder or general contractor who has the provable experience and qualifications, plus the correct insurance. It’s difficult to completely DIY a self-build house if you aren’t an experienced builder yourself, as you’ll need the proper licenses and insurance.

Can you get a mortgage to buy land?

Yes, it’s possible to apply for a self-build mortgage in order to first purchase the plot you want to build on. If you don’t have the money to purchase land upfront, it may be better to get a separate loan known as a land mortgage or land loan. This is because the amount you can borrow to pay for the land can be higher than the amount you can borrow to pay for the construction of the house.

For example, you may be able to borrow up to 75% of the land value, but only around 60% of the building value (in the case of a self-build, this value is estimated from the plans). Of course, you’ll need to have your designs drawn up and secure planning permissions from the local authority before submitting your self-build mortgage file – the application won’t succeed without them.

Having two separate mortgage loans for the land and the house itself can make things complicated, and may increase your costs, but it’s still manageable if you take good control of your finances and manage your resources in a realistic way. The down payment for a land mortgage may be around 15%-25%, while the deposit for the actual self-build mortgage may be higher (between 25%-40%).

How do construction loans work?

A construction loan is simply another name for a self-build mortgage – because you’re borrowing the money to build the house rather than purchase a completed structure. Just as there should have been a new build structural warranty in place from the start when you purchase the home from a developer, so should there be a self-build structural warranty in place before you start construction.

If a bank agrees to lend you money for a self-build, you can receive a lump sum mortgage payment in arrears after funding everything yourself or in gradual advance payments. Obviously, most self-builders prefer to receive stage payments throughout the build to fund each stage of construction work, rather than paying out of pocket then using the mortgage payment like a reimbursement.

You can find out more about self-build mortgage stage payments in our dedicated guide. One of the risks of this type of loan is that your project can easily go over budget if you don’t plan carefully, and the mortgage offer may have a time limit (for example, giving you one year to complete the build). The interest payments are also likely to be higher than they would for a typical residential mortgage.

On the plus side, self-build stage payments are an extremely useful way to keep the project on track, and having a self-build structural warranty ensures that the bank should sign off on each stage payment. Your structural warranty provider, such as ourselves, should send a chartered surveyor to carry out regular professional inspections and check on progress and legal compliance.

These loans are sometimes also known as construction-to-permanent loans, because the stage payment loan can be converted into a normal residential mortgage once the building is complete, at which point you’ll begin making your self-build mortgage repayments according to the contract. You’ll typically only be paying interest on the mortgage loan throughout the duration of the build.

Which structural warranty do you need for a self-build mortgage?

As we’ve discussed so far, a specialised self-build mortgage usually requires an equally specialised self-build warranty. Here at Architects Certificate, we provide a range of UK Finance-approved 10 Year Structural Warranties, which are accepted by more than fifty approved lenders in the UK.

No one can answer the question of whether it’s better to buy or build a house for you – that’s something you need to decide for yourself. Your chances of mortgage approval and the processes involved in building and buying can vary according to your individual circumstances, so it really is up to you. Whichever route you choose, we can provide a suitable structural warranty for your home.

For more information on the UK Finance certificates and warranties we supply (previously known as CML architects’ certificates), please give our team a call on 0161 928 8804 or send an email to info@architectscertificate.co.uk. We’ll be happy to provide assistance and offer a tailored quote.

This article was updated on 04/03/2022.

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Published Date: 16th May 2016
Category: ABC+ warranty, Cheaper than NHBC, CML, Home warranty, New Home Warranty Insurance, Professional Consultants certificates, self building first time buyers, structural warranty


 

19 
May

Can First Time Buyers Self-Build?

first buyers self buildFor many first time buyers the prospect of building their own house is a daunting one, especially as most first time buyers need to get a mortgage.

When everything from your credit reports to your employment status can affect whether the loan is approved or not, getting a mortgage can seem impossible. That’s before you add the cost and hassle of building your own home, so it is not surprising that many people would advise against a first time buyer self-building.

However, here at Professional Consultants Certificate Ltd, we help you through the whole process of self-building. For example, using one of our pre-approved CML, now known as UK Finance Professional Consultants Certificates, also known an Architects Certificate, you can get a mortgage with ease from many banks and building societies such as Halifax and RBS. An Architects Certificate shows the mortgage lender that a qualified architect has confirmed that the house has been properly constructed in accordance to the specifications that a newly built house is required to meet. Many of these self-build mortgages will also pay stage payments during the build, a fantastic help for first time buyers.

Our certificate on its own is favoured by self-builders especially as it is up to 50% cheaper than a full NHBC warranty. However, our CertificatePlus+ service as well as being a structural certificate includes many of the benefits of an NHBC warranty as it is a full 10 year structural warranty. At a personal level we provide that extra care and knowledge by appointing one of our highly trained office staff and one of our experienced professional surveyors to your case. Our systems allow first time buyers to self-build with much less stress and hassle, whilst giving them a good start on the property ladder.

Architect’s Certificates are issued as standard for six years cover, which the council of mortgage lenders have approved for use in their standard format. The CertificatePlus+ product offers the full 10 year latent defects guarantee in addition. We are a UK wide provider having no less than twenty regional surveyors. We have a surveyor near you. Our products are available via the website at www.architectscertificate.co.uk or by calling us direct on 0845 680 0467.

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Published Date: 19th May 2014
Category: self building first time buyers
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