Buying a home is one of the most significant decisions you will make in your life. You need to be sure that you can afford it before you sign on the dotted line, or else you risk having your finances thrown into chaos. There are many different ways to finance a new home build, so knowing all of your options is essential before investing.
Here are 4 ways to finance a new home build!
Remortgage
If you already have a property and you want to use the equity to pay for your new home, then a remortgage might be a good option. If you’ve already got enough equity in your property, then it might be worth remortgaging your current house or investment to fund the cost of building a new one.
The downside of this is that the interest rates on remortgages are usually higher than those on first mortgages, so make sure you can afford it!
Custom Build Mortgage
A custom build mortgage is a loan that you can use to finance the purchase of a home, with the builder as the lender. This type of mortgage is for people who want a one-of-a-kind home and have good credit. It’s often called a “Developer Loan” because builders most commonly use it.
One upside is that you always know how much you’re going to owe on your home, but there are downsides too. For example, if you need financing for renovations or updates, most lenders will not allow this type of financing from your builder. You’ll need to go through an outside lender if that’s what you need.
If you’re interested in this type of loan, make sure you read all the fine print carefully before signing anything!
Cash
Cash has to be the easiest way to fund a self-build project. Being able ot dip into your cash reserves to pay for everything without worrying about loans, repayments defaulting on your mortgage, etc., is the ideal situation.
The average cost of a self-built property runs around £460,000. So if you are planning ot use cash ot pay for the venture, you need to have a hefty nest egg ot support costs. If you have ever seen an episode of Grand Designs, you will be all too aware of just how quickly costs can spiral out of control. Not ot mention increased costs due to falling behind schedule. If you are a newbie to the self-build world, it is worth checking out the popular Kevin McCloud show, which charts the journeys of those wanting to create completely one-of-a-kind homes.
Bridging Loan
A bridging loan is a good option for those looking to buy a new home right away. These loans are typically used by people who have already sold their current homes and need money to put down their new property.
It’s also a good option for those who can’t afford the entire purchase upfront. Use this barclays bridging loan calculator to determine if this is an option for you.
Bridging loans are short-term loans that are often referred to as ‘bridge financing.’ The loan length will depend on what stage of life you’re in, whether you own another property, your credit score, your down payment, and more.
Image Credits: Steffen Coonan
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