self build mortgage

Build your dream home

A self build mortgage is a loan you take out on a property you are building yourself.

The biggest difference from a standard residential mortgage is that self build mortgages are usually paid in stages rather then one lump sum.

This reduces the lenders risk, and and also helps you spend your money as planned so you don't run out during the project.

Payment Timeline

You can usually expect a mortgage lender to pay you in 6 stages.
These payments will usually be made once each stage is completed, and a valuer has visted the site. It is also worth noting that these stages will vary depending on your lender, so it is important to ensure you are getting a self build mortgage that works for you.

1. WHEN YOU BUY THE LAND

2. WHEN THE FOUNDATIONS ARE LAID

3. ONCE PROPERTY IS BUILT TO THE EAVES

4. AFTER THE ROOF IS MADE WATERTIGHT

5. ONCE INTERIOR WALLS ARE PLASTERED

6. THE FINAL INSTALLMENT IS USUALLY PAID UPON COMPLETITION

What types of self build mortgages are available?

ARREARS STAGE PAYMENTS

Most commonly, funding will be released in stages after the construction of each section is completed. A valuer will normally visit the site before the payment is released. With an arrears stage-payment you may need a loan to cover the work before your mortgage is released, so you must factor this into your decision.

ADVANCE STAGE PAYMENTS

Sometimes it’s possible to get a self-build mortgage where the lender releases the money before you pay each bill. This is not usually offered by mainstream lenders so you may be limited to specialist providers.

Advantages vs Disadvantages

ADVANTAGES

There are many potential benefits of building your own home. Not only can you build the home you want, but there are also some potential financial benefits to consider.

You can save thousands on stamp duty. You will not pay stamp duty on the cost of building work or the value of the property once work is completed, you will only pay stamp duty on the plot of land itself if its value exceeds £125,000.

Another potential for financial gain is in the value of the completed property which is often worth more than the cost of constructing it.

Get in touch with our friendly team to discuss your self build options.

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DISADVANTAGES

Whilst there are financial gains, be aware that self-build mortgage rates are often higher than those of a standard mortgage. This is because self-build mortgages are not often available from larger lenders.

Deposits for self-build mortgages are often high. You usually need a deposit of at least 25% and it can be as high as 50%. You are therefore likely to need substantial savings in order to apply for a self-build mortgage, especially for arrears stage payment.

Another important thing to consider is where you will live whilst your new property is being built. If you plan to stay in your current home whilst building the new property, re-mortgaging that home could be a possibility and may help fund your self-build. However, this is only possible if you have a significant amount of equity on your current home and you must be aware of the risks involved before deciding to re-mortgage your current home.

Choosing to build your own home is an exciting opportunity which could save you money long term. It’s sound advice to be aware of what is available to you before deciding to take out a self-build mortgage.