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Thinking of self-building your next home? In this guide, we provide an overview of self-build mortgages including how they work, the different types available, and how to apply for one.

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  • What is a self-build mortgage?

    A self-build mortgage is a loan which is taken out to fund a property build you are completing yourself.

    Self-build mortgages differ in a number of ways to a standard residential mortgage, largely in the way they are funded.

  • How does the funding work for a self-build mortgage?

    Traditional mortgages are not suitable for self-builders. During a self-build, funding is required at different stages of the build to finance the project as it moves forward compared to one lump sum.

    It is important to understand how self-build projects work from a financial viewpoint.

    When are funds released with a self-build mortgage?

    Funding is released in stages as the build progresses. There are two types of stage payments available: arrears and advance payments. This determines whether the mortgage payments are made to you either before or after a certain stage is completed. This will depend on the lender, although most lenders will offer only arrears stage payments.

    Preparing a cash flow budget will help prepare you from the very beginning of the project, ensuring you have sufficient funding at each stage. If you need to buy extra materials during a point of the build, you may need to make overdraft arrangements or use savings to ensure you do not run out of funds.

    For Arrears Stage Payments, the funds are released after each stage of the build and these payments are not guaranteed.

    For Advance Stage Payments, the funds are released before each stage of the build and are guaranteed.

    How much money can be borrowed with a self-build mortgage?

    The amount you can borrow will ultimately depend on your individual financial circumstances, including incomings and outgoings, and any outstanding debt. A deposit of 20% is generally required for the land, and funds for the first phase of build.

    Lenders will all have their own maximum loan amount, with some lenders applying their own limits on borrowing for buying land, build costs, and gross development value. A mortgage will not be offered if it is not deemed unaffordable.

    All mortgage loans are on an interest-only basis to keep payments minimal throughout the build and help aid cash flow.

  • What do you need when applying for a self-build mortgage?

    There will be certain paperwork which your lender could request when applying for a self-build mortgage.

    This could include:

    • Copy of planning permission
    • Copy of a detailed plan of the build including drawings and specifications
    • Copy of building regulation approval
    • Proof of site insurance and new build warranty or Professional Consultant Certificate
    • If required, architect’s professional indemnity cover

    As well as an initial valuation, the insurer or architect will visit the site throughout the build to ensure it has been built to the correct standards.

    As part of our trusted professional partners, Private Finance have access to an insurance broker who can provide quotes for new build warranties.

  • Steps to take when applying for a self-build mortgage
    1. Determine your budget: This will depend on your income, expenses, the costs of the land and building materials.
    2. Find your plot of land: Once you have determined your budget, you will need to locate a suitable plot of land with permission to build on.
    3. Develop a detailed plan: The plan should include the design, cost of materials, and timeline for the project. The mortgage lender will need to see this too to approve your loan.
    4. Documentation: Additional documentation will be required compared to a standard residential mortgage, including insurances, and planning permission.
    5. Apply for a self-build mortgage: Your mortgage broker will help source a lender which meets your lending objectives and suitable for your circumstances. Once the lender is secured, your broker will start the application process.
    6. Get the mortgage approved: The lender will need to carry out a valuation of the plot and the proposed build to determine the amount they are willing to lend to you. When they are satisfied with the valuation and your application, they will issue the mortgage offer.
    7. Hire a solicitor: The solicitor will handle all of the legal aspects of the self-build project, including the purchase of the plot and the building contract.
    8. Planning permission and Building regulations: Before you begin the build ensure the necessary planning permission, pre commencement conditions are satisfied, and building regulations are in place.
    9. Monitor the building work: With the mortgage offer, you can start the build whilst monitoring the project carefully.
    10. Draw down the mortgage: At each stage of the build, you can draw down the mortgage, as agreed with the lender.
  • What happens once the build is complete?

    At the end of the build, or 24 months after the funds were first released, your mortgage will revert back to a repayment basis for the rest of the term. You may decide at this point to remortgage to another lender or with your existing terms.

    Benefits and disadvantages of self-build mortgages

    Benefits:

    • Self-building your own home allows you to acquire a bespoke property at the fraction of the cost compared to an equivalent property on the open market.
    • You have the ability to build the home of your dreams, and not compromise on a pre-existing building.
    • The finished property is likely to be worth more than the cost to make it.

    Disadvantages:

    • Self-build mortgages are often more complicated and time-consuming to arrange than standard mortgages.
    • The project may overrun, leading to higher costs and time delays.
    • There will be a lot of project management ensuring material and builders work to the planned schedule.
  • How can a mortgage broker help?

    Arranging a self-build mortgage is certainly more complex than a standard residential mortgage. Even the most experienced of property builders run into complications.

    With high financial risks and room for error, using a mortgage broker helps add more clarity, point you in the right direction and offer their expertise, to help save you money, time, and plenty of stress.

    Benefits include:

    • Help presenting your mortgage application in its best light to achieve terms suitable to you.
    • We know all the nuances of lenders increasing your ability to have your mortgage approved.
    • ‘Direct to underwriter’ negotiations allowing possibility for bespoke terms.
    • Industry expertise with trusted partner relations including solicitors and insurance providers.
    • Address issues at the start of the build to avoid potential issues and significant costs further down the line.

    Your home may be repossessed if you do not keep up repayments on your mortgage.

What is a self-build mortgage?

A self-build mortgage is a loan which is taken out to fund a property build you are completing yourself.

Self-build mortgages differ in a number of ways to a standard residential mortgage, largely in the way they are funded.


How does the funding work for a self-build mortgage?

Traditional mortgages are not suitable for self-builders. During a self-build, funding is required at different stages of the build to finance the project as it moves forward compared to one lump sum.

It is important to understand how self-build projects work from a financial viewpoint.

When are funds released with a self-build mortgage?

Funding is released in stages as the build progresses. There are two types of stage payments available: arrears and advance payments. This determines whether the mortgage payments are made to you either before or after a certain stage is completed. This will depend on the lender, although most lenders will offer only arrears stage payments.

Preparing a cash flow budget will help prepare you from the very beginning of the project, ensuring you have sufficient funding at each stage. If you need to buy extra materials during a point of the build, you may need to make overdraft arrangements or use savings to ensure you do not run out of funds.

For Arrears Stage Payments, the funds are released after each stage of the build and these payments are not guaranteed.

For Advance Stage Payments, the funds are released before each stage of the build and are guaranteed.

How much money can be borrowed with a self-build mortgage?

The amount you can borrow will ultimately depend on your individual financial circumstances, including incomings and outgoings, and any outstanding debt. A deposit of 20% is generally required for the land, and funds for the first phase of build.

Lenders will all have their own maximum loan amount, with some lenders applying their own limits on borrowing for buying land, build costs, and gross development value. A mortgage will not be offered if it is not deemed unaffordable.

All mortgage loans are on an interest-only basis to keep payments minimal throughout the build and help aid cash flow.

We do our best to update these guides with the most useful information for you, but the mortgage market is constantly changing.

To get the latest most tailored advice suitable to you.

Speak with an expert Arrange a consultation

What do you need when applying for a self-build mortgage?

There will be certain paperwork which your lender could request when applying for a self-build mortgage.

This could include:

  • Copy of planning permission
  • Copy of a detailed plan of the build including drawings and specifications
  • Copy of building regulation approval
  • Proof of site insurance and new build warranty or Professional Consultant Certificate
  • If required, architect’s professional indemnity cover

As well as an initial valuation, the insurer or architect will visit the site throughout the build to ensure it has been built to the correct standards.

As part of our trusted professional partners, Private Finance have access to an insurance broker who can provide quotes for new build warranties.


Steps to take when applying for a self-build mortgage

  1. Determine your budget: This will depend on your income, expenses, the costs of the land and building materials.
  2. Find your plot of land: Once you have determined your budget, you will need to locate a suitable plot of land with permission to build on.
  3. Develop a detailed plan: The plan should include the design, cost of materials, and timeline for the project. The mortgage lender will need to see this too to approve your loan.
  4. Documentation: Additional documentation will be required compared to a standard residential mortgage, including insurances, and planning permission.
  5. Apply for a self-build mortgage: Your mortgage broker will help source a lender which meets your lending objectives and suitable for your circumstances. Once the lender is secured, your broker will start the application process.
  6. Get the mortgage approved: The lender will need to carry out a valuation of the plot and the proposed build to determine the amount they are willing to lend to you. When they are satisfied with the valuation and your application, they will issue the mortgage offer.
  7. Hire a solicitor: The solicitor will handle all of the legal aspects of the self-build project, including the purchase of the plot and the building contract.
  8. Planning permission and Building regulations: Before you begin the build ensure the necessary planning permission, pre commencement conditions are satisfied, and building regulations are in place.
  9. Monitor the building work: With the mortgage offer, you can start the build whilst monitoring the project carefully.
  10. Draw down the mortgage: At each stage of the build, you can draw down the mortgage, as agreed with the lender.

What happens once the build is complete?

At the end of the build, or 24 months after the funds were first released, your mortgage will revert back to a repayment basis for the rest of the term. You may decide at this point to remortgage to another lender or with your existing terms.

Benefits and disadvantages of self-build mortgages

Benefits:

  • Self-building your own home allows you to acquire a bespoke property at the fraction of the cost compared to an equivalent property on the open market.
  • You have the ability to build the home of your dreams, and not compromise on a pre-existing building.
  • The finished property is likely to be worth more than the cost to make it.

Disadvantages:

  • Self-build mortgages are often more complicated and time-consuming to arrange than standard mortgages.
  • The project may overrun, leading to higher costs and time delays.
  • There will be a lot of project management ensuring material and builders work to the planned schedule.

What our clients say



How can a mortgage broker help?

Arranging a self-build mortgage is certainly more complex than a standard residential mortgage. Even the most experienced of property builders run into complications.

With high financial risks and room for error, using a mortgage broker helps add more clarity, point you in the right direction and offer their expertise, to help save you money, time, and plenty of stress.

Benefits include:

  • Help presenting your mortgage application in its best light to achieve terms suitable to you.
  • We know all the nuances of lenders increasing your ability to have your mortgage approved.
  • ‘Direct to underwriter’ negotiations allowing possibility for bespoke terms.
  • Industry expertise with trusted partner relations including solicitors and insurance providers.
  • Address issues at the start of the build to avoid potential issues and significant costs further down the line.

Your home may be repossessed if you do not keep up repayments on your mortgage.


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Ryan Garbett

Ryan Garbett

Director – Senior Mortgage Consultant

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    Extra points to consider for prospective self-builders.

    • Contingency plan

      No matter how well you project manage, there will always be a strong chance of running over budget or for unexpected costs to come your way. Between 10-15% of the total project budget ideally should be saved.

    • After build budget

      Allow a budget for furnishing and mortgage payments. Make sure to have budget saved to furnish the property and do all the essential gas, water, and electricity servicing.

    • A suitable place to live during the build

      Where will you live during the build and what are the associated costs? Make sure it is somewhere conveniently close to the build.

    Private Finance