Finance and Insurance
As well being your dream home, this is also likely to be one of your biggest investments. It is therefore important to make sure the finances work. If the project is genuinely a good investment, it should be possible to get a mortgage to fund it. Proper protection for this investment is provided by the relevant insurance and warranties, which will of course require statutory consents to be in place.
It is important to overcome the myth that you can't afford to build your own home. One-off houses shouldn't cost more than comparable alternatives, but you get complete control over what you get. There are a range of mortgages available to help with this, which should also be of equivalent affordability. Self-build mortgages are generally calculated on the basis of the end-value of the property and the funds are usually released in stages to cover the works carried out. Obtaining such a mortgage will usually require permissions to be in place and lenders often look for assurances about the competence of those involved in executing the work. Chartered Architects can provide certificates to satisfy these requirements.
A significant benefit of the self-build approach is the tax exemption for new-build houses. All materials and labour associated with the construction of new-build houses are exempt from VAT, but it should be noted that this does not apply to renovations or extensions, and does not apply to professional fees. In practice, there are two main routes for this, which are outlined below.
The first option is to use a VAT registered main contractor, who will invoice the client with a zero rate. This has the benefit that the client never has to pay out the VAT, but it does require the use of a main-contractor, which reduces the savings associated with a more direct form of self-build.
The second option involves the client paying out the VAT along the way and then making a single claim to the HMRC at the end of the project. This claim can only be made once in a project and must be done within three months of completion. This is most appropriate when clients are taking direct control over the management of trades.
Insurance and Warranties
You will naturally want to protect your investment and your home against unforeseen circumstances. It is therefore important that it is insured whilst being built and that it is protected thereafter. It is important to ensure that there are no gaps between your insurance and your contractors', especially when there are multiple firms operating on site, so we would always advise using specialist self-build insurers.
When planning insurance and mortgage arrangements for after completion, it is worth considering in advance what assurances these companies will seek. Well known schemes for providing warranties include those provided by the National House Building Council (NHBC), but it is worth noting that using this scheme may require compliance with their details.
Architects can offer certification under the Council of Mortgage Lenders (CML) scheme. This is intended for use in more bespoke designs and is a service we are happy to offer on our projects.