WANNABE homeowners in Wales can now get loans worth up to £400,000 to help cover the cost of building their own home.
Under the new Self Build Wales scheme, you can borrow 100 per cent of the cost to build your home, plus 75 per cent of the cost of the plot of land.
The cash is being dished out by the Welsh government's Development Bank of Wales, which has a £210million fund at the ready, in a bid to "help remove the barriers and uncertainty that prevent people in Wales from building their own homes".
It believes by building your own place, developer profits are removed and you have the opportunity to build a home that is tailored to your lifestyle as well as your budget.
And it reckons the scheme is the only one of its kind in the UK.
How does the scheme work?
Unlike many home buying schemes, which are often only available to first-time buyers, anyone can apply for this initiative – as long as the property is being built in Wales.
The self-build must also be your only property – you can't own other homes elsewhere and if you do, you'll have to sell them before the build is complete.
As a buyer, you need to stump up a 25 per cent deposit for the cost of the land.
The cost of a plot will vary but Development Bank of Wales says it's looked at scenarios with land costing between £10,000 and £100,000.
This will include any regulatory, planning or building control fees.
So a 25 per cent deposit would mean you stumping up around £2,500 to £25,000.
How do you find the best mortgage deals?
IF you have or haven't got a deposit lined-up to buy a home,shopping around for a mortgage is the same.
Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents like utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
To help you out, you don't even need to find the land yourself, you can find, search and apply for up to five suitable plots that already have planning permission in place on the Self Build Wales website.
There are currently 22 sites available, mostly around southern Wales, but some are still under consideration and have yet to be approved for development.
These plots come with pre-approved designs that prioritise energy efficiency, and you can choose from properties with two bedrooms up to five bedrooms.
But the designs are only starting points, and they can be adapted to suit your specific needs.
Once your plot has been signed off, you need to find a builder registered with Trustmark to carry out the work – you can do this on the Trustmark website.
You can't access the scheme if you've found your own private plot for development, and you can't use an unregistered builder unless you have prior approval from the scheme.
How does the loan work?
As part of the scheme, you're lent 75 per cent of the cost of the land, plus 100 per cent of the cost of the build.
Costs will vary wildly but Development Bank of Wales says the initial maximum total loan is £400,000 – although it adds that it will monitor this figure.
You'll be charged an arrangement fee of between 1.25 per cent and 2 per cent to take out the loan, while a fixed interest rate is charged at between 4 per cent and 8 per cent.
But the loans aren't dished out in one lump sum, and instead smaller amount will be released as needed throughout the build – and interest isn't charged until the cash is released.
Loans, plus interest, have to be repaid in full after two years – or when the building work is complete – whichever comes first.
You can't move into the property until all the loans have been fully repaid,
The idea is for builds to be completed within a two year time frame – if it isn't, or you can't afford to repay, your situation will be assessed on a case by case basis.
It's expected loans will be repaid by either selling your existing property if you have one, or by taking out a regular residential mortgage to cover the costs.
Self Build Wales isn't providing the mortgages, so you'll need to speak to a broker to find a suitable mortgage before going ahead with the scheme.
Are there any catches?
Yes, the scheme does come with a few catches. For example, you can't rent or sell the self-build home for a minimum of five years from the completion date.
If you have to sell within five years, all proceeds after your mortgage lender has been fully paid (if you have a mortgage), will be payable to Self Build Wales.
And if you start the process you may lose out financially if you pull out mid-way through.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home's value – or 40 per cent in London – after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
You also need to cough up for stamp duty yourself. Known as land transaction tax in Wales, this is applicable on properties costing more than £180,000.
Is it worth it?
David Hollingworth, a mortgage expert at broker London & Country, explains that people going down the self-build route typically have to take out a specialist self-build mortgage.
This will usually pay out funds at stages throughout the build with people remortgaging to a traditional repayment mortgage once the build is complete.
But he says these mortgages are specialist products that typically cost more upfront, and usually require a broker to dig out.
Specialist lender Buildstore, for example, charges rates of around 4.99 per cent on self-build mortgages up to £400,000 when you put down a 20 per cent deposit.
"Self-build is possible and there are self-build mortgages," said Mr Hollingworth.
"These typically release funds at stages of the build, so for anyone looking at it, it’s critical they work out all the numbers so they know they have enough capital to get things started and they fully understand the mortgage."
But he points out that where self-builds often fail is at the planning application stage, so using sites that have been pre-approved could be an advantage.
He said: "Often the shortfall with self-build is finding a plot you can get planning permission on.
"So packaging everything up so you have the land already with planning permission and you know that the funds are there will really help some people make what could be a dream a reality."
If you're thinking about this route, ensure you compare all the options and speak to an independent mortgage adviser, and possibly a financial adviser too.
Another option for those struggling to get on the housing ladder is a 100 per cent mortgage. We explain what these are and how they work.
Halifax and Lloyds both launched no-deposit mortgages last year.
You can also check out our My First Home series for first-time buyer inspiration.
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