Have you had the drawing of your dream home in mind for years? Is it finally so far that you can buy a building plot then read what choices there are to make around the mortgage and self-construction of your home. Building a home yourself is a fun creative process because you can decorate and build each room to your own taste.
Need mortgage for your building plans?
Even if you are in a hurry, we can guide you smoothly and well in realizing your building plans. We know the game rules of banks and can guide you through the mortgage process with the right guidance. A first call appointment gives many of our clients the necessary rest.
When does it involve self-building?
Most lenders use the following definition:
- A house that is completely built in-house, possibly with the help of subcontractors;
- A casco house delivered by a contractor that is completed by you or subcontractors.
- What costs are there with regard to self-building
Around the arranging of the construction of your new home there are a number of costs around the mortgage. In this way, in addition to the construction costs, the management work also plays a major role. You can think of the costs of an architect, costs of the environmental permit, construction fees, connection costs of the utilities, et cetera.
Also the investment of a lot to build is part of the cost estimate. Sometimes there are also costs to prepare the land for construction.
A rule of thumb is that you will incur additional costs of 10 to 15% of the construction costs.
Time of payment of the preparatory plan costs
In the run-up to the construction of your own home, you will be faced with start-up costs. In most cases these costs can not be co-financed in a mortgage because a mortgage can only be established after issuing an environmental permit or possessing a lot. You often pay these costs out of your pocket. These are all costs that are incurred before construction actually starts.
A good example of this is the research costs:
- Costs for technical inspection if you buy an existing building and (partially) demolish it;
- Inventory for the presence of asbestos;
- Costs of a cultural-historical research;
- Accompanying costs for architect or architectural draftsman;
- Constructor for construction calculations.
These costs do not apply in all cases. This depends heavily on your building plans. If you buy a catalog house, a lot of costs are also included in the purchase price.
Mortgage and self-building
It is also possible to take out a mortgage for a house that has yet to be built. It is even possible to only take out a mortgage for a building plot. In that case, you must be able to contribute a large part to your own money for the expected foundation costs (construction costs) of your future home.
In order to submit a mortgage application, you must have income data such as pay slips and employer’s statements. Of the building to be built, the bank often wishes to receive the following set of documents:
- A purchase agreement of the land and / or home signed by all parties;
- The irrevocable environmental permit must be submitted before the payments start from the building depot;
- If there is a ground lease, a copy of the leasehold contract;
- A valuation report showing the value of the home after it has been built on the basis of design drawings;
- Quote from a contractor or a purchase / contracting agreement signed by all parties with construction insurance.
Building insurance and breakdown guarantee
As soon as you apply for a mortgage, you must demonstrate to most lenders that your contractor provides a reduction guarantee. If the contractor unexpectedly goes bankrupt then there must be a cover that your house can be completed.
Not all contractors offer such a facility. In some situations you can opt to take out a separate insurance policy that provides for a reduction guarantee.
You can also insure other matters with the help of building insurance. Such as, for example:
Cover against damage during construction due to storm, fire, collapse, vandalism or water damage;
Theft of building materials;
Damage to third parties, for example, piling activities at your neighbors.
Your contractor may also have taken out such insurance, but it can sometimes be useful to take out insurance yourself. Suppose your contractor is liable for damage and the premium is not paid or the company is not financially strong, you can still stand empty-handed. The interests are big when it goes wrong.
We can advise you on the conclusion of such construction insurance and / or coverage with a reduction guarantee.
Financing building plot
A frequently heard wish is to finance only the costs of the land. For example, because you do not have a concrete plan yet, you have only agreed with the seller to take care of the transfer at a fixed time.
Although it is tempting to say that it is possible to finance only the building plot, there are real problems here. Your overall situation and the assessment by a bank will make it possible to finance a lot separately. We can also advise you on this and arrange the mortgage for the purchase of a building plot without having direct construction plans or an environmental permit.
A cost item that should not be underestimated is construction interest. You can owe this interest to the seller because of the ‘late’ purchase of the land. In the purchase agreement of the land, a term and interest rate is often agreed upon on which you must purchase the lot. On average, in 2019, some 6.5% per year will be charged for the later decrease of the land than agreed.
Details mortgage and self-construction
Payments for the land and contractor are made from a building depot. Depending on the lender, there is the possibility to declare digitally via an app from this building account.
Some lenders give a discount on mortgage interest if you buy a new-build or self-build home.
Benefits of self-construction
The following benefits can play a role in the choice to build a house yourself:
You have a lot of freedom in making choices around the design and building materials of your home;
The price / quality ratio for DIY is reasonably good, you do not have to pay a margin for a project developer;
If you start building together in a neighborhood, you immediately get to know your neighbors and a positive bond often arises.