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Q.

How do people get to become mortgage free using self build

A.

Let me explain the principle using an example.

Let us assume 

• That houses cost £200,000 in your area
• That self build houses can be built with a saving or discount of 40%, so it cost you £120,000
• That property in the area stays at the same price over a number of years
• You are starting with just enough for your deposit and club subscriptions
• We are disregarding mortgage payments to keep the explanation simple

1. Now you self build the first house with a saving of 40% you spend £120,000, using a 95% mortgage
2. You move into this Home (home1)
3. You self build a second home again with a mortgage of 95% again costing £120,000 to you including the mortgage.
4. You move out of home 1 to the new home (home 2)
5. You sell home 1 for £200,000 pay off the mortgage and keep the £80,000 over
6. You self build home 3, this time you need a mortgage for only £40,000 as you have the £80,000 profit from home 1
7. You move to home 3
8. You sell home 2 making a £80,000 profit
9. You use the profit to pay the mortgage off of house 3, and have £40,000 over
10. You now have a home and its all yours no mortgage as well as £40,000 profit still towards starting on your holiday home.

Now some notes and fine tuning, 

• There is no tax on these profits, as you lived in each as your main home for a period.
• Property has always gone up in price so you will get windfalls due to owning each of the homes over an overlap period even accounting for property prices and costs increasing.
• From the time home 1 was complete you had equity so could have remortgaged or borrowed against it to help balance the books if you wanted to.
• Homes 1 and 2 were being built to sell so you should be able to maximize the gain on these and make well over the average 40%.
• As homes 1 and 2 were not for your own long term use finding the plots on these was not so critical and so moving on with these can be achieved faster than perhaps you would if they had been your long term home.
• It gets easier and more profitable as you gain experience.
• Most people grade up, by that I mean they get a larger home on each move.

Time scale

1. Join the club to getting first house started say 6 months
2. Build house 1 say 8 months, towards the end start looking for plot 2
3. Find plot 2, may already have been found but lets assume it takes 4 months
4. Build house 2, say 8 months, towards the end start looking for plot 3
5. Find plot 3, maybe already found but as it assumes here to be your long term home lets assume you take a long time say 8 month
6. Build home 3 say 10 months, you are a little more critical and have to wait for some special parts.
7. Total time 6+8+4+8+8+10 = 44 months, just short of 4 years.

Other options

Rather than sell each home convert them to buy to let mortgages, releasing the profits from house 1 and 2, so you have a mortgage free home and two properties rented out covering more than the mortgages moving towards providing you with a pension.

Starting with a cheap home and moving up over 4 or 5 steps you can start with limited ability to get a mortgage (maybe affordable home) and end up with a manor house, mortgage free.

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