If you read my article Is Custom Build the Future of UK Housing? last month you’ll have seen that commentators are predicting that custom build could be the future of housing in the UK, and the main strategy employed by the government to solve the housing crisis. In addition to the trends in custom build, we have seen an increase in the number of self-build applications. Self-build is becoming more complicated due to the lack of available plots so the applications can be for basement conversions and complex renovations. If these trends continue, it means that everyone in the mortgage industry will need to have a deeper understanding of the application process for specialist mortgages.
I have been talking with our underwriters about this topic to find out more about what they see and how their thinking is changing. At Saffron Building Society our underwriters assess complex or extraordinary applications, so they see the common problems and errors in self and custom-build applications. Karen Mepham is one of our dedicated specialists on self-build, and she gave me some useful tips on ways to make sure the application gets a speedy and accurate response.
All applications must be accompanied by full planning consent. If consent is unavailable, it will be impossible to proceed with the application. Planning consent can take approximately 12 weeks. Without it, a mortgage valuer can’t assess the value of the property so it is one of the essential components of the application. Make sure it is in place before you proceed or you will be frustrated by delays further down the line.
Costs of the build
In some instances it is clear that applicants have not fully considered the costs of the build, and detailed costings are always required when applying for a mortgage. Karen says she can very quickly see those applications that need further analysis of the build costs. A lack of detail about costs sets the alarm bells ringing.
A fixed price contract with the builders always provides more certainty, and without one more information will be required.
A common but surprising mistake is that people forget they will need somewhere to live while their renovation or house is being completed. Rental costs affect affordability and have to be included. It sounds obvious, but you’d be surprised by the number of people who forget this critical piece of information. Additionally, people need some form of contingency plan with savings to fall back on should an unexpected event happen. No matter how well a project is estimated, there may be unknown costs that crop up along the way.
A warranty provides the guarantee that any future problems will be fixed by those responsible for the build. However, construction warranties come in many different shapes and sizes. Before submitting an application it’s important to check the warranty the applicant has in place and make sure that it’s acceptable to your chosen mortgage provider. People are increasingly using architect’s certificates, but this is a little riskier and will need further investigation by the mortgage provider, who will usually have a list of acceptable warranties.
At Saffron, we accept the well-known, proven providers such as NHBC, BLP, Premier Guarantee, CRL, ICW Ltd, Aedis. Other providers are considered on a case by case basis.
We try to work as flexibly as possible with applicants as we have experience dealing with the many different variables which occur during a house build. However, to ensure a swift response, we need to understand the applicant’s needs in respect of how they require to draw down the stage payments. We can then confirm that these are realistic and have comfort that they will be able to complete the work with the funds they are requesting.
Planning, Planning, Planning
Karen’s mantra is that time invested in getting a good offer in place significantly outweighs a quick response. Sometimes, making an application with half the information seems that it will get the ball rolling but the risk is that you’ll have to go back to your client with lots of questions only to run the risk of getting a negative response later down the line. It will save time if you get the customer to complete the fundamentals of an application in advance.
If you are in any doubt about the requirements for self and custom build applications then feel free to call us for more information.
View our Self Build Mortgage