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Product matters

The most imp-ortant part of the BuildStore product offering is the self-build facility rather than the actual mortgage deal.

It is offering 95 per cent of the land purchase price and build costs with stage payments in advance. The majority of lenders that offer self-build terms will go to a maximum of 75 per cent of the land purchase price, with only a few lenders going up to 85 per cent.

Many more will lend up to 95 per cent of the final value but that is not a lot of help if you cannot afford to buy the land in the first place.

The average self-build project costs around £147,000, with the average mortgage for this around £100,000 and an uplift of 25-30 per cent helped by the fact that the builder only pays stamp duty on the cost of the land.

Usually, a builder will need at least 25 per cent of the total costs to fund his way through the various stage payments although this is not the case with the BuildStore method. Using the accelerator mortgage indemnity policy, this releases stage payments in advance of building work by taking out a short-term indemnity policy to ensure the correct cashflow.

The product, attached to the scheme through Verso, tracks the base rate plus 1.25 per cent for the term of the mortgage. The redemption penalties are reasonable at 3 per cent, 2 per cent and 1 per cent in the first three years.

A unique and particularly attractive feature is that the customer can live in their existing property while building their new one. Overall, a sound product coupled with the benefit of BuildStore&#39s experience in this niche market.

Sally Laker is managing director of Mortgage Intelligence

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