Since we were little most of us have been dreaming about our own perfect home.
For some it is a little yellow house with a white picket fence and for others a colossal, glitzy mansion. You may have even started compiling a Pinterest board, detailing exactly what you would like it to be. Taking on a self-build project is a big endeavour that will take months, possibly years, to complete. No matter what anybody says to you, it will be expensive and stressful, so you need to know what you are getting yourself into before actually committing.
Building a new home does not offer the same convenience as buying an existing house. You have to find the land, hire an architect or builder and choose each and every element of the new structure. It is a long and stressful process.The big advantage here is that you are much more likely to get exactly what you want. For many this factor alone is enough to choose building over buying. A new home is less likely to have the health concerns or toxic materials of an older home – things such as asbestos, lead paint, mold, etc. You can build with certain materials and make the property environmentally friendly. For the first few years you’re less likely to deal with big-ticket maintenance issues like leaky roofs or failing heating and cooling systems in a newly built home. Moreover, all the appliances will be brand-new and likely under original warranty. Finally, the construction materials and structure will be up to the latest safety standards. Most self-builds, if managed properly, should be worth considerably more than the construction costs. If all goes according to plan, this means you get your dream home for much cheaper than you would have to pay for an existing property.
Developing a budget for a new home starts with deciding how expensive a home you wish to build. A better question for most of us is how expensive a home you can afford to build. Determine how much you can spend. Figuring out how much of a home you can afford isn’t all that difficult. Lenders and real estate agents do it every day. A “lender” may be a bank, a savings and loan institution, an insurance company, a credit union, a relative, or some other source. If you take your monthly payments (house payment, car loan, charge cards, etc. – not utilities, food, entertainment) and divide it by the sum of all your monthly income, the number you come up with should not exceed .33 to .36. Research the costs of architects fees, builders, materials and everything else you will need to build your own home from scratch.Do the math. Look at the costs and how much you can afford and decide whether you can cope with such a huge financial commitment.
Self-build mortgages work differently from house purchase mortgages. Rather than getting all the cash upfront, your lender will release it in stages to fund the construction. These stages might be from the buying of the land right to the interior design, and everything in between. Your lender may want to pay after each construction stage is successfully completed. It’s another aspect of your planning that will need careful thinking and a thorough assessment of what your lender is prepared to offer. Because self-build mortgages are relatively risky for the lender you will need a deposit of at least 30% – and the most attractive deals require 40% or more. Most lenders will also expect you to have all the relevant planning permission in place before you approach them and to present detailed plans.
Around 13,000 people successfully self build every year, so clearly the plots are out there. A common mistake made when plot hunting is searching over too wide of an area. Keep an eye on planning applications in your target region, too. Local authorities publish a register of these on their websites. Write to the applicants and ask if they are interested in selling to you. Use land listing agencies – There are some specialist agencies that collect information from estate agents and private individuals selling land and make it available to subscribers to their service. These can save you a lot of legwork and usually offer a good range of sites in different areas.
Construction of new buildings requires consent from the local planning authority in the form of planning permission. The fee for submitting a planning application varies depending on the nature of the development. The cost is currently £385 for a full application for a new single dwelling in England, but this fee is different in Scotland, Wales and Northern Ireland. For home improvers, an application in England for an extension currently costs £172, whereas in Wales the cost of a typical householder application is £166 as of today. Each site has different requirements but generally an application should include five copies of application forms, the signed ownership certificate, a site plan, block plan and elevations of both the existing and proposed sites, a Design and Access Statement and the correct fee. You can apply for planning permission online.
The mechanisms of purchasing a plot are fundamentally the same as those for buying a house and the same scale of stamp duty taxation applies to residential land. Depending on the vendor and how you found the land, you could be bidding at an auction, on the telephone, negotiating through an estate agent, submitting sealed bids or buying privately. You can also gather different ideas from all the houses you see among the way (and take some photos while you’re there).
In general, you have a higher chance of finding the plot of your dreams by participating in auctions, simply because estate agents earn lower fees on plots than existing houses and they are less likely to put the effort to help you find what you are looking for. If you still prefer agents, make sure you phone them regularly and not wait for them to contact you with the details of your dream plot.
Finally, you should not ignore your chances of finding the right plot via a private buy. Tell all your friends, relatives, and acquaintances that you are looking to buy land for a self-build. Even if there isn’t a separate plot of land already, you can still try to convince the owner of a large garden to sell it to you for your self-build project. If you are lucky enough to find the right piece of land, you will avoid real estate agent fees and the overhead of auctions.
Once you secure the plot, the next step of the process is to hire an architect. Every architect has an individual style and approach. The client-architect relationship is very personal, involving discussions of your habits, your hobbies, and your taste. So, you want the choice to be right. First off, understand yourself and who you can work with. Don’t rush it, take your time. There are some vital aspects to think about on your quest for hiring an architect. Ask friends, neighbors, and co-workers about their architects. If you can’t find a good recommendation, you can always use Flattro to find reputable architects in your area. Once you find architects who have designed projects similar to the one you desire, contact them and find out whether they would be interested in your project. Ask how long the project will take, discuss fees and anticipated construction costs. Visit at least one project designed by each of your prospective architects. Ask the owners about any problems that may have been encountered during the design and construction of the project. You may be working closely with your architect for many months and you want to gather as much information in advance as possible. Choose someone you can communicate with and understand each other well. Take into account every aspect of their proposal, including price, schedule, their past performance, and last, but not least, do not discard your gut feeling lightly. The architect is probably the single most important person whom you will trust with making sure you get the home of your dreams, so trust and good communication are of utmost importance.
Neighbours, friends and family are a great source of names of reliable builders in your local area. Another way to find reliable local builders is to use websites that currently offer a searchable database of builders that come complete with the number one most important part of the builder-search criteria of all — the recommendation. The concept relies on homeowners giving feedback about their builder once the work has been completed. For example, you can post your job on Flattro, get a free plot and plans survey, compare quotes, and find the right builder for your project.
Once you shortlist a select few builders, you can invite them to survey the plot and plans, so they can prepare a bill of works and quantities, on the basis of which you should get an official quotation. This is a usually overlooked, yet extremely important, step of the process. Make sure you share as much information and details with the builders and never assume they know what you want and how you want it completed. Ask detailed questions and be wary of overly simplified answers or of builders who seem to be very confident how everything will be extremely easy and straightforward. This might be a sign of a builder trying to take advantage of you. A reputable builder will never sugarcoat things and will ideally let you know what can go wrong. Construction projects rarely finish on plan and on schedule, so any builder trying to convince you how you will definitely get what you want on time and below your budget is something you should definitely pay attention to.
Speaking of costs and budget, a high price is not necessarily a sign of quality in a building firm, but it is important to resist the obvious temptations of a low price. If one firm comes back with a quote for your work, which is significantly lower than the other tender prices, you need to be suspicious. It may just be that the other quotes are excessively high and the one firm is simply good value, but more likely than not this one firm is putting in a speculative bid to try and get the work at any cost. One of the tricks some builders prefer to use is submit confusing quotations that omit some crucial details and pieces of work, which you might be forced to pay later on. You don’t want to spend too much on your project, but at the same time remember that if it’s too good to be true, it usually isn’t.
Once you’ve got quotes and an idea which builders you are willing to consider, ask about their experience and qualifications. Check whether the builder uses sub-contractors. Does the builder have insurance? Always ask for a detailed quote, checking how long the price is guaranteed for. Agree phases of work and stage-payments. Definitely keep a final payment until the work is complete. Even better, you should always contractually agree for a 5 to 10 percent guarantee deposit that the builder will receive once the build has been problem-free for at least 6 months (definitely try to agree on a longer period).
Finally, where possible, you should source materials yourself to cut costs, because the builder may be tied to a particular merchant, which doesn’t necessarily offer the best deals around. On top of that, most contractors will typically charge you a 10 to 15 percent sourcing fee, which is perfectly normal, because they will incur additional costs. The flipside is the builder cannot justify a low quality work with unfit materials, because he is the one that sourced them in the first place.
When you finally have your dream team of builders, you are ready to start building. The process of building a new home can be both exciting and extremely tiring. There’s going to be a lot of hard work and disruption in your and your family’s life, so be prepared. The better you have planned, the less stress you will encounter. If you have invested enough time and resources in all the previous steps, you can expect the process to be relatively stress-free.
The very first step is to sign the contract with your builder of choice. Make sure the contract includes clauses for performance, quality, and late fees. You should definitely insist on at least a 2-year explicit guarantee (this is what you get by law) on all works and materials that the builder has sourced. Unless you are confident in your business law expertise, make sure you have a friend or relative who is or, even better, a certified lawyer take a look at the clauses before signing. You are going to spend a significant amount of money and it is definitely worth making sure everything in the contract works well for both sides.
Once you sign the contract, unless you are at least as good a negotiator as President Trump claims to be, you will probably have to pay a significant deposit, which demonstrates commitment and allows the builder to schedule his team and buy materials. Of course, make sure you pay as little as possible as a down payment. If possible, divide down payments in stages as the work itself. For example, if the builder insists on a 30% down payment, negotiate to pay 30% in advance at the start of each stage. This gives you more security and, depending on the lending institution, might actually be a requirement for financing.
During the actual construction make sure you visit the construction site at least once a day. Yes, this might seem over the top, but remember that you committed to building your own home and this is not something to overlook. If you are too busy to do it, consider hiring a professional. Such visits should make sure that the process is on schedule and any problems are resolved promptly. Be wary, if you see little or no progress on site, no apparent work being done, or lack of personnel. This might be a sign that something is off. In such a case, do not proceed with paying a penny more, unless the work you agreed on has been completed to a very high standard.
If you followed the above steps, you should expect to have the home of your dreams as a result. Now it is the time to make the final calculations and start enjoying your new property. One final step would be to try and reclaim the value added tax you paid on materials (builders working on new homes should be zero-rated, so you should not have paid VAT there). You can generally reclaim VAT, if you built a new home or converted an existing property into a home. Such a home only qualifies for a VAT refund, if it is separate and self-contained, you or your family will live or holiday in it, and it is not for business purposes. The VAT refund is claimable on materials which are incorporated into the building and cannot be removed without tools or special equipment. These include steel, concrete, bricks, wood, and glazing, which, depending on the build, might be significant expenses. It is important to remember that you can claim a VAT refund by applying to HM Revenue and Customs (HMRC) within 3 months of completion of the project.
We hope that we were able to give you a good overview of what building your own home would entail. It is true the process is complicated, but if planned carefully and well in advance, it should not be stressful or too expensive. In the end, you will have a home that is completely your own and will have saved some money in the process.
Did we miss something? Maybe you’ve got an insider tip to share? Sound off in the comments, if it’s something valuable, we might include it in the article. We aim to constantly improve this information, so home builders have all the information they need in one place.
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