Everyone wants to build a one-of-a-kind home. It may sound exciting and fancy, but it is quite hard to finance such a type of home. Hence, people may require a loan to build their dream house. Getting a loan for a self-build project is not as easy as it sounds.
There are some ways to finance a self-build home, which are as follows-
- Selling the existing property
- Re-mortgage the house or other property.
- Manage a proportionate down payment
- Hire a qualified contractor
- Self-build mortgage
Selling the existing property –
If the owner has the facility to accommodate temporarily, the fastest way to cover cash is to sell the existing home.
Re-mortgaging the house or other property –
The interest rates are higher for self-build mortgages. In that case, re-mortgaging the existing property or home will be a wise decision.
To go for a re-mortgage deal is far better as such deals last for a maximum of two years. The construction of any residential building does not take more than two years. After then, the owner is free to sell the building to pay off the debt or whatsoever.
Manage a proportionate down payment –
In comparison to the traditional mortgage loan, construction loans are considered to be of higher risk, and this is the reason the lenders ask for a minimum down payment of 20-25 percent of the construction loan.
Self-build mortgage –
The self-build mortgage is different from regular mortgages as the money is released to the borrower based on the progress of construction to ensure the safety of the amount.
An arrear type of mortgage depends upon the value of the property as per the progress of the construction. A particular percentage of the total amount is released with the progress of construction.
Whereas, the advanced type of mortgages are cost-based and provides the money in advance of the progress of each stage of construction. But they are a little risky if the lender did not give money on time, the project gets waste. If you want to find out more about the self-build mortgage options, you can take professional help, online or offline.