Self-Build Mortgages; Case Study 1
Mortgage for a Modern Method of Construction, Timber-frame, timber and cement tile clad Self-Build
The brief; Arrange the mortgage for a grand designs style self-build property, featuring modern construction materials including an imported timber frame, clad with both fibre cement tile and timber.
The customers already lived on the plot and were mortgage-free, planning permission had been approved and they needed funding with an initial payment based on the land value with planning and would reside in a makeshift dwelling on the land during the build process.
The hard bits; Mortgaging a self-build property that has been built from non-traditional construction methods is significantly more complex than the TV might suggest.
Grand designs and similar programs make very little of the actual challenges of raising finance on some of these types of self-build projects.
Out of perhaps 10 or so lenders in the country that are involved in self-build mortgages, only a handful could consider any kind of property with a significant proportion to be clad in timber.
It’s important to differentiate having timber as the actual main wall leaf, from a property that would have a brick wall and timber as weatherboarding which is not problematic.
Of those lenders who could even consider timber cladding & fibre cement tiles, only one of those lenders approved the plans as acceptable after sending these to their panel surveyors for review.
What is considered a modern method of construction and what is traditional construction in self-build design?
Traditional construction methods are brick or stone walls, or perhaps a timber frame property with outer brick walls, and a roof that is either tile, slate, asphalt, stone, or a flat roof. Thatch roof properties might be considered standard by some lenders.
There are also several types of standard construction processes for properties built in the majority from concrete, which I won’t go into for the sake of brevity.
Anything else is likely straying into modern construction methods and this is an area where the number of materials and systems is mushrooming at an unprecedented rate.
If you delve into the world of very obscure construction, like mud walls and haybale insulation type eccentricities then it is likely that you may find only one or even zero lenders that would ever consider it.
Not being able to adequately insure the property could also render it non-mortgageable.
The solution and how we added value;
Firstly we advised the client to seek guidance from a mortgage surveyor on whether there would be anything about this construction system that would cause them to have reservations if they were asked to value the property for a mainstream high street lender once the construction was complete.
I even suggested it might be worth getting anything in writing, even if that meant paying someone £200 or so to give a formal mortgage valuation report based just on the plans.
This is the kind of thing it’s easy to overlook the significance of. It’s easy to think that once you have found that single lender who agrees to something quirky that it is all systems go.
When you are heavily invested in the design and have bought into the architect’s concepts etc it could be easy to get tunnel vision.
But if they built a white elephant that was very hard to mortgage again with a mainstream lender, simply because we had found the one surveyor in the country who was game enough to accept it, then the customer could have ended up deeply out of pocket.
I also advised the client we should dig a little deeper and press for a full response as to how the design could be changed to make it more acceptable, as lenders who were supposedly open to both timber frame and timber clad systems were declining the property due to the construction method.
We felt this was useful because there is also a danger that this pattern could repeat itself every time someone tried to mortgage the property, making it extremely tiresome to sell in the future. If simple design alternations could negate this risk, it was worth consideration.
So, we asked the lenders to get confirmation from their surveyors of what exactly would need to change for the design to be acceptable.
This ended up changing the response completely, and a lender whose panel surveyors had declined the construction type originally later came back and agreed to it after we pressed them further.
A change that saved several thousand pounds in mortgage interest and fees over the 12 months the build is expected to take.
It’s very easy for professionals in any field to refuse to consider something compared to agreeing it when that might be far outside their comfort zone of the known quantities of traditional construction methods.
And one of the hardest parts about the mortgage industry is that you are often communicating with a 3rd person, liaising with other people out of sight, so communication can become a game of Chinese whispers and make a property like this challenging even for a professional to find suitable lenders.
If you’re planning a self-build project with a modern method of construction you will have more than enough on your plate without having to find out which lenders will accept it too, so using a broker like us who understands the market & has experience of these kinds of properties will keep you free to focus on the build itself, which will take more than enough of your time.
You will also have an extra trained pair of eyes and ears looking to pre-empt issues and helping to steer you on the path of the plainest sailing and make sure you avoid big pitfalls, which is certainly worthwhile in such complex transactions.