Self-Build Mortgages

Self Build Mortgages

If you have brought land and have planning permission to build a property, then you can potentially obtain finance to build your own home either to rent or to live in.

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How will I receive the funds?

The funds for the build are released in stages. Different lenders work in different ways.

For example, some lenders will lend you up to around 80% – 85% of the land value so you can put foundations in, then a surveyor the lender instructs (paid for by you of course!) comes to value the land with foundations, the lender will then give you an extra 80-85% of what the increase in value is so you can build to the next stage which in some cases is to get the property water tight. A surveyor will come out to value the property and the lender will lend you further money up to 80-85% of the extra increased value since the last stage so you can finish the build off.

How many stages will there be?

Some lenders release funds up front and release funds in 3 stages and some release in 5 stages.

Some lenders however want you to get to the first stage i.e. get the foundations in then they release money once the work has been done.

What guarantees do I need to supply?

All mortgage companies will require some form of guarantee when the property is built to ensure that if there are any major problems they will be rectified. The normal guarantees are things like NHBC for example and the property will have to be signed off by a fully qualified architect.

Which lender is suitable for you depends on what you need and what your circumstances are so best Get in Touch to find out what is applicable for you.

TIP: Please be aware there may be tax implication with building your own home as well as benefits you may get i.e. VAT back on materials etc so please speak with an accountant or a tax expert to fully understand your liability and potential complications or benefits.

Self Build Mortgages Q&As

Are self build mortgages more expensive?

No more expensive than normal mortgages.

Self build mortgages how much can I borrow?

The amount you can borrow does vary from lender to lender but depending on your circumstances you could potentially borrow up to five times you gross annual salary or self-employed income

Which lenders offer self build mortgages?

There are many lenders who offer self-build mortgages. Mostly high street lenders offer these like, Halifax, Nationwide and Barclays are to name a few.

Will I need a lot of savings to build my own house?

Not necessarily. You can start your build with a relatively small deposit and borrow up to 95% of your land costs and up to 95% of your build costs. If you do have savings however or access to other cash, then you may prefer to use an arrears stage payment mortgage. Whatever your circumstances our advisers will find the best product to suit your needs.

Is there only one type of mortgage available for self-building?

Our specialist advisers can recommend the right mortgage to suit you and your project including the mortgage type (discount, tracker, fixed rate etc), repayment method and repayment terms. Similarly, arrears based self-build mortgages are also available from several different lenders offering a variety of terms. Mortgage products change on a regular basis so call us to find out what deals are currently available to you.

What is the position on stamp duty?

One of the benefits of self-building is that it is better value than buying a completed property. One area where you get better value is in stamp duty as you only pay this based on the purchase price of the plot and not on the value of the completed house.

Will I have to sell my current house before my new home is ready?

This will depend on how you wish to finance your build and how much cash you have in savings. If you choose an arrears stage payment mortgage, then you will need sufficient money for a deposit of between 15% and 25% of the land cost as well as money to pay for the materials and labour for the early stages of the build. If you do not have sufficient savings, then you may decide to sell your current house to release equity before starting your new project Receiving your stage payments in advance during the project will ensure that cashflow is not an issue during the build so you can continue living in your current house until you are ready to move.

Want to know more?

Get in touch with of our mortgage saving experts today to find out how we can help.

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