Tiny Tuesday: Scotland’s Self-Build Initiative

The Highland Self Build Loan Fund gives money to Scotland residents who want to build a tiny house, or indeed a larger house, with a build cost up to £175,000 (about US$300,000). The fund addresses a problem with lenders: they often won’t approve a mortgage for a house that doesn’t yet exist. That gap in funding ices out anybody who doesn’t have the means to pay for construction out of pocket.

The Highland Small Communities Housing Trust recognized a shortage of housing in the Highland region and decided they should enable more people to self-build if they choose, especially those who have never owned a home. They cite the investment and satisfaction from making one’s own design decisions as another motivator. The result is the Highland fund.

highland_map

The Highland region of Scotland.

Here’s how it works, according to an article on BuildIt. If the Highland fund accepts your application, they give you a loan in staggered payments for a portion of the projected build cost, based on your ability to pay. Once construction is complete, you get a mortgage on the property and use that money to pay back the original loan.

It’s a little bit like the Power Purchase Agreement (PPA) that many solar panel vendors offer. The idea is to loan money to individuals for a product (a self-built house or a solar panel) which then enables them to repay the loan (through a mortgage or electricity sales, respectively). Many banks won’t offer a loan like this because the absence of collateral, at least at the outset, makes it a risky deal. Fortunately, the results (more affordable housing or renewable energy production) are desirable enough that other entities will accept the risk.

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