Tag Archives: building warranty

self build stage payments

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.

Residential Real Estate Development in Manchester Tops Pre-Recession Days

manchester

Come to Manchester for residential real estate opportunities!

The number of properties currently under construction are at their highest levels since 2008. The Annual Crane Survey by Deloitte Real Estate indicates a clear agenda of development and growth for the Northern and City Centre areas. They are also indications that 2016 will be the busiest building period since prior to the recession. Active residential developers in and around Manchester include Beech Properties, De Trafford Estates, English Cities Fund, Lend Lease, Pinnacle MC Global, Renaker and the Select Property Group.

Here at PCC Ltd we advise for and provide warranty for all residential development and look forward to a very busy 2016.

How can I get a warranty for my new build house? 0845 680 0467

Building warranty supplier 6 and 10 year availableLarge house builders will often get an NHBC warranty on their new build homes which offer protection to the purchaser and enable a mortgage to be secured on the property.

Smaller builders and self builders have a better value scheme open to them known as the CML, now known as UK Finance Professional Consultants certificate (previously called Architect’s Certificate).

The architect certifies that the house has been properly constructed in accordance with the national building regulations and the plans and specifications.

The larger guarantee providers, such as the NHBC, are not always the best choice for the smaller house builder, developer or self-builder since:
1. They will not step in if you have already commenced on site.
2. They act on behalf of their scheme member i.e. the contractor
3. They will require a bond payment from unregistered builders
4. All fees have to be paid up front whether the guarantee is issued or not
5. Often their inspectors are not chartered professionals

The whole point of any scheme that requires regular inspections throughout the build is to ensure that the dwelling is built to such a standard that problems are eliminated. In this respect a chartered architect or surveyor will provide a more diligent service than an employee of a large company because they are personally liable in cases of negligence.

Remember that a chartered professional has undertaken at least seven years of study, examination and supervision by senior architects before given licence to practice. Their reputation and their future in the industry depends totally upon the quality of their service (‘duty of care’).

www.architectscertificates.co.uk have been providers of CML, now known as UK Finance Professional Consultants Certificates since 1989, their certificates are often 50% cheaper than NHBC cover. Call on 0845 680 0467 for a quote today.

How do I buy a building warranty ?

Structural 10 year warrantyA full repairing structural warranty is sometimes the preferred option for a new home or converted property.

The most common new home warranty used by builders is an NHBC warranty. For small builders and self builders the cost of obtaining NHBC cover is often cost prohibitive, so we are pleased to share details of a great building warranty scheme for significantly lower cost.

This new warranty scheme is called ABC+ Warranty.

The ABC+ Warranty scheme not only provides builders of new homes a six year professional consultants certificate, but also a full ten year new home latent defects warranty.

This gives builders, new home owners and all mortgage lenders complete peace of mind that the property has the highest level of protection and cover should any problems arise with the property.

ABC+ Warranty is offered by a leading supplier of professional consultants certificates, we are Professional Consultants Certificates Ltd and our surveyors have been issuing certificates across the UK since 1989.

When choosing  ABC+ Warranty we also liaise with your solicitor and/or bank totally inclusive within our ABC+ Warranty scheme and this added benefit is unique within the warranty market place. ABC+ Warranty is most cost effective to initiate from the outset of the project, but never fear, we can still step in very late and still provide the ten year warranty if requested by your purchaser. Our clients tell us that the ABC+ Warranty system is cheaper than most warranty providers despite providing the expert certification by CML, now known as UK Finance professionals.

Contact Professional Consultants Certificates Ltd for a quote today on 0845 680 0467 or through their website www.architectscertificate.co.uk

How can I get a building warranty for my new build house ?

How can I get a building warranty for my new build house ?

new build needing a building warrantyLarge house builders will often get an NHBC warranty on their new build homes which offers protection to the purchaser and enables a mortgage to be secured on the property.

Smaller builders and self builders have a better value scheme open to them known as the CML Professional Consultants Certificate (previously called Architect’s Certificate) which provides many of the building warranty features of the NHBC at a much lower cost.

The architect warrants that the house has been properly constructed in accordance with the regulations and the plans and specifications.

The larger building warranty providers, such as the NHBC, are not always the best choice for the smaller house builder, developer or self-builder since:
1. They will not step in if you have already commenced on site.
2. They act on behalf of their scheme member i.e. the contractor
3. They will require a bond payment from unregistered builders
4. All fees have to be paid up front whether the guarantee is issued or not
5. Often their inspectors are not chartered professionals

The whole point of any scheme that requires regular inspections throughout the build is to ensure that the dwelling is built to such a standard that problems are eliminated. In this respect a chartered architect or surveyor will provide a more diligent service than an employee of a large company because they are personally liable in cases of negligence.

Remember that a chartered professional has undertaken at least seven years of study, examination and supervision by senior architects before given licence to practice. Their reputation and their future in the industry depends totally upon the quality of their service (‘duty of care’).

www.architectscertificates.co.uk have been surveying properties since 1989, and providing CML Professional Consultants Certificates since their introduction. Their certificates are often 50% cheaper than NHBC cover. Call on 0845 680 0467 for a quote today.