BuildLoan and Nottingham Building Society (BS) have launched three ‘cost-based’ mortgage products for people building their own homes.
The products offer up to £600,000 and 80% of a client’s construction costs, with interest payments taking effect once construction has started.
The first product has an initial rate of 3.8% for two years and a completion fee of £1,499, while the second has a payout rate of 5% and no completion fee. Neither product has an application fee.
“These products eliminate the cash flow risk associated with some self-constructed, custom mortgage transactions that base stage releases on site value – accepting releases based solely on cost removes that risk and gives clients tremendous confidence that they can continue building,” says Chris Martin, product development and underwriting manager at BuildLoan.
The third product has a fixed rate, with an initial salary set at 3.74% until May 2023, when it will revert to 4.24%. The completion fee for the product is £1,499.
Funds are released in stages for the entire product range and are agreed at the application stage. Funds are based on the cost of each item of work.
“Our loans are now linked to the cost of each stage of work, with a guaranteed stage release model agreed upon application. This eliminates the need for interim appraisals, removing the risk that a client will not receive the funds he was expecting,” says Nikki Warren-Dean, Midstream Sales Manager at Nottingham BS.
“The peace of mind that confirmed cash flow can bring should not be underestimated – in fact, it can be the key to a successful and efficient self-build project,” she adds.