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It makes sense if you buy
a plot of land, buy materials whilst paying wholesale
rates, and then employed labour directly, as you will
be buying a house at cost price. You would be paying
what a house developer has to pay, but you don't need
to add on your marketing and sales costs and a profit
margin. Many banks and building societies offer mortgages to
self-builders. They are usually willing lend you between
25% and 80% of the land's value in addition to between
65% and 95% of the building costs. Any money for construction
is paid in arrears usually, once key stages of the building
work are completed. Under different self build mortgage choices, 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. 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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