Is a self-build project or conversion a good investment? | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 15/07/2020

A fall in house prices, coupled with low savings rates, has seen some investors looking to buy-to-let properties as an alternative investment. However, for those where a second home isn’t currently an option, then purchasing a property to convert or a self-build project could build greater long-term value than buying ‘off-the-peg’.
While not guaranteed, the cost of upgrading or building a new home is usually lower than purchasing the equivalent fully completed. In addition, a project of this type allows for buyers to design the property specifically for their needs and to achieve the level of design and energy-efficiency they require.
Now could be a good time to look at more unusual properties, not only due to the Government’s zero rating on Stamp Duty for properties up to a value of £500,000, but also with the launch of the Green Homes Grant in September 2020. Falling house prices offer the chance to negotiate a better price, however in areas with better demand, sellers may decide they want a share of the Stamp Duty savings and stick closer to their asking prices.

Conversion delivered family's low-impact home at a better cost

The Ecology Building Society helped Ian with a mortgage to fund the conversion of a steel-framed Dutch barn and a pre-cast concrete cowshed into an energy-efficient family home. The high cost of housing in Devon was a key part in Ian deciding to complete a conversion instead. Ian commented: “If you look at the ‘ready-built’ house you could get in Devon with our budget, it doesn’t compare. It’s fantastic to be able to do what we’re doing.”
Ian needed to find a mortgage lender for the project that would accept the unusual construction and status of the buildings. Ian described trying to find a mortgage lender: “It quickly became apparent that the non-standard construction of the building put off a lot of lenders. We didn’t feel this property is high-risk because it’s a very robust construction, but we needed to find a more specialist lender and a mortgage broker suggested that I speak to Ecology.”
Key to the success of a project is the careful management of costs, with any overspends counteracted by savings in other areas of the build. In the longer-term, the converted property should also continue to save Ian and his family money through being more energy-efficient and with a reduced reliance on mainstream energy providers.

How to find a self-build mortgage

Finding a mortgage lender is one of the biggest difficulties for those looking to complete a conversion or self-build project. Moneyfacts.co.uk data shows there are over 3,000 residential mortgages available in the UK, of which 62 accept self-build applications. Some building societies, such as Bath Building Society and Hinckley and Rugby Building Society, offer their self-build mortgages through BuildStore, a specialist self-build mortgage broker. Other lenders have their own specialist self-build mortgages and others accept self-build projects as part of their standard mortgage range.

Emily Smith, national account manager at Hinckley & Rugby Building Society, said: “Hinckley & Rugby Building Society offers self-build mortgages exclusively through BuildStore. We are proud to be able to offer mortgages to clients who want to make their dreams of building their own home become a reality. We have a flexible lending policy, which allows us to consider all different types of construction on an individual basis.”


Identifying those lenders that can accept a self-build or conversion project is only the first step to getting a mortgage on a self-build project. The lender will want to check the property’s condition and situation to establish its value now and in the future at completion.

A self-build project or conversion may include dealing with a property that has unusual construction materials or those with the potential for defects, such as timber frames, clay lump and concrete. The lender will also want to understand the future saleability of the property.


The result of this valuation will determine the decision to lend. It is for this reason that the experience of a mortgage broker can really pay-off, as multiple valuations are time-consuming and expensive. A mortgage broker that has previously handled self-build applications can use their knowledge and experience to identify which lenders may be more likely to accept certain projects.

Is now a good time to buy an unusual property?

Converting a property or a self-build project may not be for everyone, but for many buyers, there is still the appetite to live in a unique property. Thatched country cottages and barn conversions are often desirable, but buyers will need to find those mortgage lenders happy to accept these property types.


Moneyfacts.co.uk contacted 60 residential mortgage lenders all of whom offer mortgages directly to the public asking if they would consider an unusual property, such as a thatched roof, concrete construction, timber frames or Grade II listed buildings. Some 13 lenders responded, with 11 confirming they would in varying degrees consider these properties.

Lenders that will consider a mortgage for an unusual property

Lender

Timber frame

Concrete

Listed Grade II

Thatched

Aldermore

Yes

Yes

Yes

Yes

Bath Building Society

Yes

No

Yes

Yes

Chorley Building Society

No

Refer to lender

Refer to lender

Refer to lender

Ecology Building Society

Yes

Yes

Yes

Yes

Hanley Building Society

Yes

Yes

Yes

Yes

Hinckley and Rugby Building Society

Yes

Refer to lender

Yes

Yes

Leek Building Society

Yes

No

Yes

Yes

Loughborough Building Society

Yes

Yes

Yes

Yes

Marsden Building Society

Considered on a case by case basis.

Nationwide Building Society

Yes

Yes

Yes

Yes

Penrith Building Society

Yes

No

Yes

Yes

The table above is for those properties that are unusual in their construction but are fully built and do not require building, conversion or adaptation.

The above is an indication only of the criteria lenders might accept and buyers will need to check their specific case with their lender or mortgage broker. Some known exceptions are below but this is not an exhaustive list.

Acceptance could be subject to a valuations report or certificate.

Concrete may be subject to criteria including Insulated Concrete Forms with external brick or certain types of finish, warranties, age of property and any repairs being completed through an approved scheme.

 

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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