Self Build Finance
Self-build finance is an integral part of any self build project. In our experience, self-build projects can be so cash-sensitive that a seamless, flawless cash flow can affect your ability to keep to schedule, and a contingency fund of at least 10% is a must.
Having established an overall budget for your self build project, there are some more figures to you will need to work with. Any self-build project has 3 important financial elements:
- How to Get Funding for a Self-Build Project– Firstly work out how much will your self-build project will cost, and how is it going to be financed.You will need a very detailed understanding of the design at this stage, and will probably need to develop a project plan to submit to your chosen self build mortgage company.
- How much is Stamp Duty? – Good news for most self-builders; if your building plot does not exceed £125,000 cost, the transaction will probably be exempt from Stamp Duty.If you are paying £125,000 or less, then you do not have to pay stamp duty.If you are paying more than £125,000, then you pay stamp duty of between 1 to 4% of the purchase price.The tax is tiered at set amounts, which rise as the purchase price rises.As another bonus, as of October 2007, all Zero Carbon homes costing under £500,000 will be exempt from stamp duty until 2012, and these costing over £500,000 will get a reduction of £15,000.
- Value Added Tax on Self-Builds- VAT does not apply to new self-builds projects, although beware that you can only make one claim at the end of your project, and you will also need to include all receipts.Services can be claimed for as part of a materials package.If you have already paid you will be able to reclaim any VAT on construction.
A contingency sum of at least 10% is a good guideline to aim for when planning your self-build finance.If part of the build goes over budget or extra problems occur, then you should be able to cover this to make sure the rest of the self-build project can continue efficiently.
A building plot can consume anything between 1/3 and 2/3 of your total budget.It is possible to buy land for less by purchasing a plot of land forsale without planning permission.This carries some risks but if you buy wisely with a view to building in the medium- to long- term it can reduce this risk.Your plot of land could rise in value considerably, once planning permission has been granted.If you need help gaining planning permission, we offer this service.
Connections to sewerage, and utilities can quickly shoot up in cost - particularly if you are looking to buy in more rural locations. Depending on the location of your building plot, these can approach £5,000 or more.
Planning and Building Regulations fees will need to be included along with any surveying work required. Should you also require the services of an architect orproject manager, this will take up roughly 10% of your total self-build budget.
With all these figures and to obtain and factor into your self-build finance it can seem an overwhelming challenge.It is wise to ensure the finances are in place from the start rather than be caught-short mid-build and ensure that your hard work, money and vision are all financially worthwhile.