Can You Get A Mortgage Before The House Is Built?

How do you find your dream home? Well that depends on what your dream home is.

If you’re looking for a character-filled period property then obviously you will need to buy an existing home. If, however, you’d prefer a modern home built to your exact requirements, then maybe it’s time to look at building your own home.

How Do I Build My Own Home?

Building a home is obviously a major undertaking.

First of all you will need to find suitable land. This means a place where you would be happy to live and where you can get planning permission for a house. How easy this will be depends greatly on what part of the country you want to live in. It is likely to be easier to find a plot of land in rural Yorkshire than in Central London.

You will then need to decide exactly what type of home you want. Again a 1 bedroom cottage will be cheaper to build than a 4 bedroom family home. With a self build you can always start small and leave your options open to extend later, e.g. if you start a family.

Finally you have to decide how you want to go about building your new home. If you have the necessary skills you can, of course, build it yourself. Otherwise you will need to get in people to help.

If you need professional help then you will need to budget for this.

Budgeting to Build Your Own Home

The budget for your future home can be divided into 4 parts: land, fees and miscellaneous costs, materials and labour.

Land, materials and labour are all essentially self-explanatory. How much you will need to budget for these depends on what you are building, where and how.

As a note of caution, be very realistic about what you can achieve yourself. Your time and health have a value and trying to spread yourself too thinly can be a recipe for struggle if not disaster.

For an accurate budget, you will also need to be prepared for various fees and miscellaneous costs you will encounter along the way. For example, like buying a house, buying a plot of land may require the help of a solicitor. You may also require 3rd-party insurance during the build process.

Then there may be connection fees for utilities and other services.

Financing The Build

The good news is that building a home from scratch can work out much cheaper than buying the equivalent property ready-built. The bad news is that self build mortgages are a specialist market.

As fewer people require them, there is less incentive for lenders to offer them at all. There is even less incentive for them to offer the wide range of options and deals available for mortgages on ready-built properties.

In practical terms, most self-build mortgages work along broadly similar lines. The buyer pays the costs up-front and then recovers the money from the lender in stages. This means that people building their own home need to have sufficient funds to hand, to cover each phase of the build process until they are refunded.

It may be possible to find a self-build mortgage which pays the money for each building phase up front. Prospective builders should, however, look carefully at the cost of these mortgages. The convenience may be outweighed by extra charges.

On the subject of extra charges, self build mortgages are likely to be more expensive than traditional mortgages. This is partly because lenders see them as more risky and partly because there is less competition in the self-build market.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Thinking Of Buying A Second Property?

The dramatic increase in the cost of properties in the past decade has placed house buying out of the reach of significant sections of society. 

Young adults with no capital, low wages and uncertain financial futures stand next to no chance of accessing finance from a bank, but neither do older people with a low level of savings. 

Many older people who have rented all their lives or have been council house tenants, find the cost of renting in retirement too high. 

The retirees who have owned properties all their lives and who have paid off their mortgages, generally get to enjoy a far better standard of living, than those who have not if they have not budgeted for their accommodation. 

Some children of retirees who are finding their retirement a struggle have, in recent years, come up with new and innovative financial strategies to help their parents. 

If your parents have existed on a low income for much of their lives and they lack the money to put down a deposit on a property (normally 25 percent of the property’s value), banks will be less than enthusiastic to lend to them. 

One of the more popular strategies for getting round this is to purchase a second property for retired parents (or any dependent for that matter). Funding a second property and buying a home for a family member can be a great investment and can help to relieve financial pressure for your loved ones. 

How to get a second mortgage

 If you decide to go down this route, you must be at pains to point out to a potential lender that your parents are not your tenants. 

You need to give the bank clear and precise information that distinguishes you from a buy-to-let property owner. 

Simply keeping the bank informed about you and your parents needs will prevent you from winding up with a much more expensive mortgage product. 

It is important not to be (wrongly) classed as a buy-to-let landlord and only offered specific (and expensive) buy to let mortgage packages. 

The banks, in principal, are more than happy to lend you the funds to buy another person a house to live in, without you also having to live on site, as long as it is not a formal tenancy situation. 

You might find that with the spiralling costs of university tuition and accommodation, that it makes sense to buy a property for your son or daughter while they are studying. 

Again, you need to establish with your bank that you are buying for a relative or dependent and not establishing a formal tenancy agreement as a landlord. 

Equity 

You can access a standard mortgage for another person and agree to take on the responsibility for repayment of the loan, or you can access the equity in your own property. 

In the first scenario, the second home is at risk, but in the second scenario, your home is, and the equity that you have built up over the years will be spent. 

This means that you need to be careful with such decisions and where possible, access some expert and impartial advice. 

You might find that the type of deal you need is not available through your high street lender and consulting an independent advisor could help you access different mortgage products that suit your needs. 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Will You Be A Silver Entrepreneur?

Retirement is not what it used to be. A century ago, when old age pensions were first introduced, life expectancy was far lower than it is today.

After a life of hard manual work, most people of retirement age had approximately five years to savour the meagre entitlements available, before shuffling off this mortal coil aged, on average, 52.

The future for retirees today could not be more different, the years that follow the end of a working life are no longer counted in single digits but normally, decades.

For many, their retirements are a time of new opportunities when a lifetime of prudence and investment in pension pots pays off.

With the advent of new pension freedoms enabling savers to draw down large lump sums from their pensions without large tax penalties, it might be possible for a generation of ‘silver entrepreneurs’ to emerge.

According to the Daily Mail, a tenth of retirees are now considering taking the plunge and setting up small businesses with their nest eggs and on average, the size of the pot they can draw from is £550,000.

This suggests that the desire to ‘start a business using my pension’, is widespread amongst retirees.

A lifetime of expertise

Ending a career at 55 or 65 has often meant abandoning a lifetime of knowledge and expertise acquired in a valuable and important field.

With new opportunities to ‘use my pension to invest in a business’ opening to entrepreneurial pensioners, these skills no longer have to go to waste.

It might be that in retirement you can establish the type of small business or consultancy that you had always dreamt of, one which is not necessarily based on your work.

Some retirees, used to a life of frenetic activity in business, have found doing nothing in retirement frustrating and there is growing evidence that simply ‘giving up’ at 65 is very bad for mental and physical health.

Getting Advice

Even though many retirees might have had successful business careers, the prospect of cashing in up to a quarter of an entire pension pot in one go to set up a small business can be daunting.

Firstly, any investment is a risk, even if you think the business idea is sound and likely to work. Taking a risk when you are 35 is a different proposition to taking one when you are 65.

This means that, not only should you not gamble more than you can afford to lose (not that you can really ‘afford’ to lose any pension at all), but seeking professional business and investment advice is essential.

Many people who have worked in law, finance, engineering or other key professions or trades might have managed throughout their career to have successfully avoided ever creating a business plan or cash flow forecast.

Most local authorities run free business courses, which are always worthwhile investing your time in, but getting expert independent financial advice on your new business is also important.

Making the business as tax efficient as possible, ensuring that the right kinds of personal and professional insurance, or public liability insurance is purchased at as cost advantageous a price as possible - these are the types of issues where a trained adviser can give you some guidance.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.