The self-build mortgage means the mortgagor does not need to have plenty of cash available at his disposal to be able to build his own home.
To buy a property it is necessary to provide mortgagee security of any existing property so that the mortgagee cannot default the payment.
But if the owner does not have an existing property, a self-build mortgage releases the money as the construction work progresses.
There are two types of stage payment mortgages, here the arrears stage payment mortgages will discuss.
Arrears stage payment mortgages
It is a traditional version of the mortgage, which means it is a valuation-based mortgage. The funds are processed with the progress in the construction, to ensure there is no default in payment. The plus point is that the mortgagor does not have to pay interest on the whole amount, but the amount received only.
The stages on which the release of the fund depends are as follows –
- Purchasing the land with all permissions.
- Constructing the foundations
- Standing the pillars and the walls as per the individual building method
- Preparing the structure of the windows and doors so that the building as air ventilation and is watertight.
- Fitting of all things required before plastering, like wiring and water pipes.
- Fixing of remaining stuff after plaster, like switchboards, sockets, bathrooms leading to the completion of the house.
The owner should have sufficient money to buy a land at least, and the money to cover each stage of the building before receiving the payment from the lender. The owner should have a contingency fund of 10 to 20% of the cost of construction in case of any emergency.
The regional building societies, such as the Ecology, Bath Building Societies, and Furness, are mostly the lender who offer this mortgage. They promote the construction of energy-efficient homes, and hence depending upon the sustainability of the project, the discounted interest may be given.
Though there is a risk because an arrears payment mortgage does not give a return on moneybut offers a percentage of the increased value of the site.
These were the conditions for receiving funds in arrears stage payment of mortgages. If you want to learn more, you may search online.