How to get a self build mortgage with ICF
You’ve found the building plot and you’re ready to build your own with Insulated Concrete Formwork (ICF). Congratulations. But, have you considered how to get a self build mortgage on an ICF build?
With new regulations requiring homes to meet higher energy efficiency standards and greater awareness of Modern Method of Construction (MMC) like ICF, getting a self build mortgage has become much easier.
ICF is rapidly gaining popularity in the UK with homeowners, developers and architects. Not only does it contribute to superior levels of energy efficiency, airtightness and thermal performance but it can also deliver a high-quality build that can help lower long-term operational costs.
As demand grows, access to suitable finance options is critical to supporting this shift towards innovative construction methods. We asked Buildstore Mortgage Services, the UK’s leading supplier of support and services for individual homebuilders, what self-builders must consider when getting a self build mortgage for an ICF home.
Getting the right mortgage for your Insulated Concrete Formwork (ICF) home
Building your dream home with Insulated Concrete Formwork (ICF) offers numerous benefits, including design flexibility, faster construction, superior build quality, and exceptional energy efficiency. However, securing self-build mortgages differs from obtaining a mortgage for a standard ready-built property. Understanding your financing options is key to ensuring a smooth self-build journey.
Why self-build mortgages are different
Unless you have all the money in place when building your own home or you plan to use an existing property to raise funds against, you will likely require a self build mortgage. Unlike traditional mortgages, these loans will give you the money in stage releases as the construction progresses, ensuring funds are available when needed.
Whether you choose a turnkey solution where your builder or ICF supplier assists with project planning on the build or a self-managed approach where you oversee the build yourself, selecting the right mortgage is crucial.
Funding your ICF build: timing matters
One of the earliest milestones in an ICF build is the payment for manufacturing, delivery, and assembly of the ICF system. These payments are often made in full before delivery, meaning you need a mortgage that aligns with this schedule to prevent delays.
Types of Self-Build Mortgages
There are different mortgage types available which depend on your project requirements and your individual circumstances. There are two main types of self-build mortgages: valuation-based and cost-based.
Valuation-Based Mortgages
With a valuation-based mortgage, funds are released based on the increasing value of your partially built home. However, this approach can create challenges for ICF builds:
The Challenge: A mortgage lender’s valuation won’t account for the ICF superstructure until it is delivered and assembled. This creates a funding gap, potentially stalling your project.
Valuation: Often the valuation does not increase in line with the spend on site again creating a funding gap whereby you may struggle to pay your trades people and materials.
Cost-Based Mortgages
Buildstore Mortgage Services’ Guaranteed Cost-based mortgages are specifically designed for self-build projects, including ICF homes. These mortgages release funds based on the agreed cost of each construction stage, rather than the property’s value.
Advanced Stage Payments: Lenders release funds before each stage begins, allowing you to pay for your ICF building system in line with your contractual payments. This also makes you cashflow positive throughout the build project.
Arrears Stage Payments: Funds are released after each stage is completed on a guaranteed basis with no need for an interim valuation removing much of the stress associated with a valuation based mortgage.
Since payments are guaranteed as part of your mortgage agreement, cost-based mortgages provide the financial certainty required to manage your project efficiently.
Always speak to your mortgage advisor who can recommend the right product for your project and discuss interest rates.
Turnkey or Self-Managed: Tailoring Your Mortgage
The type of mortgage you require will depend on whether you opt for a turnkey approach or you decide to manage the build yourself.
If your ICF supplier is managing the entire build, payments are typically required at defined stages. Unless you have significant savings a cost-based arrears stage payment mortgage is likely the best option, providing funds after each stage is completed in line with your contractor’s payment terms.
If you’re overseeing construction and purchasing the ICF system separately, you’ll need funds upfront to cover material and assembly costs. An advance stage payment mortgage can be the ideal solution.
How much can you borrow?
Your borrowing capacity depends on your financial situation, including your income and existing commitments.
Valuation-Based Mortgages
Typically limited to 80% of the mortgage lender’s valuation during the build. This creates uncertainty, as the available funding isn’t confirmed until requested.
Cost-Based Mortgages
these custom build mortgages provide guaranteed upfront stage payments based on your build costs, either before or after each stage of works depending on your payment schedule. BuildStore’s unique cost based self build mortgage enables you to borrow up to 95% of your project costs (or 100% if you already own your plot), with a maximum of 85% of your home’s expected end value. This ensures complete clarity over funding at each stage.
Planning an ICF self-build home?
As with any self-build project, you should always start the finance process early. We work with BuildStore who understand the ICF system and have self-build mortgages that will work with your project. However, there are other lenders on the market and you should also contact building societies and mortgage brokers to see what mortgage products and self build finance options they have available. You will need to understand their repayment basis, interest rates and homebuilding finance.
You will also need the correct documentation in place include planning permission, cost estimates, detailed plans, construction specs and a valuation from a qualified surveyor experienced in ICF builds.
Throughout the fully managed build you will need to get building regulations approval at the correct stages. Unless you are experienced, it may be sensible to hire a project manager to over the the self building project.
Once the property has been built you will need to check what the build warranty covers, have building insurance in place, a structural warranty for the property and an Energy Performance Certificate (EPC rating).
If you have any questions about securing finance on an ICF building or self-build please get in touch.