 
Posts: 145
Joined: 3/12/2009
From: United Kingdom
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Buying a Plot?
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Below is a question i was asked by a client wishing to buy a plot of land to develop as opposed to buying a new home. Thought it may be useful to share this info, please see Q & A below.
My wife and I sold our home 3 years ago, pre the house price crash thankfully, and have had the capital in the bank ever since then. We have not been able to find a house we like in all this time, but a friend mentioned to us about buying a plot, then we could build our dream home exactly as we wanted! We would not have enough funds to buy the plot and do all the build works so my question is, can you get a self build mortgage? And, if so, what is different about it than a normal mortgage?
There is such a thing known as a 'self build' mortgage. As with all mortgages these were of much greater availability a couple of years ago and not many lenders offer them at present.
In order to be in a position to apply for one of these you must own or be ready to acquire a plot. It is essential this plot has suitable planning permission accompanied with a set of plans of what the proposed building will look like.
From this the lender will instruct a valuer to confirm three valuations :the current value of the plot, as a field with planning permission, and what it will be worth when you finish the building detailed in the plans, also known as the final valuation!
They will use the final valuation to base their lending decision, however they will release money throughout the build in the following way process:
They will release up to say 75% of the current and ongoing value as the build proceeds. Therefore as the build progresses and the value of the plot increases they will allow you to draw upon further funds.
You need to ensure you use a suitably qualified architect to supervise the build or an NHBC qualified builder. I would recommend you discuss your situation in much more detail with an independent mortgage broker who specialises in self build mortgages before making any offers on a plot.
< Message edited by -- 12/8/2010 2:28:53 PM >
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