Is self-build cheaper than buying?

Self-Build Insurance

When you’re weighing up whether to build your own home or buy an existing one, there are numerous factors to consider. The main one is the cost of each option. Here, we’ll explain the costs involved in a self-build project and some ways to lower them. This will help you to decide if the self-build route is right for you or if buying an existing home is better suited to your finances.  

Ways to self-build your home 

The first thing to understand is that there are different ways to handle self-build projects. The extent of your involvement in each option plays a big role in the cost factor so we’ve detailed them below. 

  • Hands-on approach: If you’re experienced in this area, it makes sense to design your home and be involved with its construction as much as possible. You need to find a plot of land, obtain planning permission, buy the construction materials, arrange the project insurance and hire any contractors you need to help you. 
  • Hire a team: If you’re inexperienced or simply don’t have the time to get too involved with the project, you can hire a team to do the work for you. This includes an architect, a planning consultant, builders, a site manager and other contractors. 
  • Self-build community or group: You can collaborate with other self-builders, such as in a housing co-op or a self-build housing association. This is a good way to save money on a self-build project. In a community self-build project, you work together to meet the project’s needs. This can be achieved by getting actively involved or clubbing together to pay for contractors to complete the work. 
  • Kit home: With this option, you have the flexibility to tailor the design of your home. It is constructed from prefabricated components and is custom-built in a factory environment. It is then delivered to your self-build plot, usually flat-packed, and assembled on-site. 
  • Custom build: If you think a self-build project may be too overwhelming, you may prefer a custom-build home. For this option, you work with the developer, such as liaising on the design aspect, but they handle most of the project. They can source the plot of land, deal with planning permission, handle the utility connections, hire contractors and deal with the day-to-day project management.   

The costs involved in building your own home 

The cost of building your home depends on where you want to live, the type of home you want to build and your financial circumstances. But, usually, it’s more cost-effective to build your home than buy one. According to the National Custom and Self Build Association (NaCSBA), it could actually save you 20–40% in costs to build your home instead of buying one. The costs you need to allow for include: 

  • Buying a plot of land, including the legal fees for the transaction and stamp duty, if applicable. 
  • Hiring contractors and paying for professional services. These costs depend on your level of involvement with the project but you may need to pay for the services of a planning consultant, an architect, builders, plumbers, electricians, carpenters, plasterers, tilers, glaziers, heating engineers, decorators, landscape gardeners and a site manager.  
  • The construction costs, which include buying the materials and covering the labour costs for the various construction stages. For example, laying the foundations, dealing with the electrics, plumbing and drainage, building your home’s structure from the flooring to the roof, handling the internal and external decoration of the structure, incorporating the fixtures and fittings as well as any specific features you want to include. 
  • Miscellaneous costs, such as legal fees, survey costs, self-build insurance cover, building regulations fees, waste removal costs, security costs and the cost to buy or hire the necessary safety equipment. 

Tax savings 

When building your home, you can save on taxes compared with buying a home. For example, you can claim back the 20% VAT that has been charged on some of the materials. You can make significant savings on stamp duty too. Building work isn’t subject to this charge and stamp duty isn’t applied to the value of your finished property. It’s only applied to the land’s value, subject to the stamp duty thresholds. 

How to lower the self-build costs 

There are various ways to lower the costs for your self-build project:  

  • If you have the skills necessary to do some of the work yourself rather than outsourcing, you can lower the costs considerably by not having to pay contractors.  
  • If you’re experienced in this type of project, you can deal with the project management. Taking on this extensive role will save you thousands of pounds. 
  • A simple design costs less than one with an irregular shape and unique features. 
  • Choose the construction materials and methods carefully. For example, a timber frame usually costs less than a brick structure. If you opt for the latter, however, be sure to check the bricklaying method. Some methods take longer than others so you’ll have to pay for the additional labour time. A low-pitched roof is generally cheaper to build than a steep roof. 
  • A simple heating system can reduce your costs considerably. 
  • Building a smaller property reduces your costs. This doesn’t mean sacrificing your space — smaller self-builds can still be larger than new-build homes with the same number of rooms that are purchased from developers. With a self-build home, it’s a good idea to build a second storey rather than leaving it as a bungalow. The bulk of your costs will already have gone into the first floor, including the foundation, walls and roof. The addition of a second floor and a staircase won’t increase your costs too much in comparison. Not only will you maximise the space on your plot but you’ll increase the value of the finished house. 

Is self-build cheaper than buying an existing property? 

When you buy an existing property, the cost includes the land your home is built on, the materials it’s been built with and the labour that went into its construction. But on top of that, you’re paying for the convenience of being able to just move in and live without having to do anything else. These factors can make buying a home much more expensive than building one. 

When building a home, you have full control over the costs. The more hands-on you can be with the project, the more money you’ll save instead of paying others to do the work for you. But it’s not just thinking about the cost to construct your home that’s important. Building your home can make the future running and maintenance costs cheaper than those for an existing property. This is because you’ll build your home to a high standard. Whilst some of the materials you choose may be expensive, they will last much longer. Therefore, you’ll save on maintenance costs in the future. You can also build your home to an energy-efficient standard, saving on day-to-day running costs. 

Arrange your self-build finance 

Self-build projects in the UK are increasing in popularity and when you’re ready to start building your home, we can arrange the finance for you. A self-build mortgage is different to a standard residential mortgage in that the funds are released to you in stages throughout the project rather than in a lump sum at the start.  

Our mortgage brokers are available on 01322 907 000 to explain how a self-build mortgage works. They can discuss your financial circumstances and plans for a self-build project to determine how much you need to borrow. They can also guide you on the financial help that’s available, such as the Help to Build scheme, and arrange your self-build insurance to ensure that you have the right protection in place throughout your project.