Build Self Finance

When seeking build self finance, the key elements to consider are the manner of the lending and any conditions of their lending. These two need to be considered carefully to avoid possible financial hardship and cash flow difficulties.

As part of the build self finance the lender usually advances the money to you in five steps. This is in order to stop cash flow being a problem. As you might have guessed, you need to plan carefully the costs that you may incur in building the house. You won't get the mortgage unless you've done this anyway, but your instalments might not be sufficient if you have underestimated your costs or suddenly need to buy new materials.

There are three basic choices of paying interest, namely Variable rate, where the rate can go up or down, fixed rate, where the rate is fixed for a pre-determined period, and capped, where the monthly payments have a maximum for a guaranteed period.

The variable rate mortgage means the interest rate may change. In general, the standard variable rate (SVR) charged by the mortgage lender will mirror the Bank of England Base rate, so you should monitor that rate to suggest what your mortgage rate may be.

On the other hand, with a fixed rate mortgage, you are guaranteed to pay a certain level of monthly payments for an agreed period. A capped mortgage is a combination of fixed and variable mortgage. There is a maximum rate over which you will not be charged for a certain period. If the SVR falls below the cap, your payable rate follows it down.

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