Self build mortgages

Self Build Mortgages – Financing Your Self Build Home

Across the UK self build mortgages are growing in popularity all the time as the trend for self build homes increases the demand for this type of specialist financial product. Building your next home from the ground-up is something that many of us dream of doing and it is becoming more and more popular as people look at new ways of getting their dream home, in the location that they want, and fast.

It is pretty obvious why self build homes are proving to be the way forward for many people… they offer a number of attractive benefits in that building it yourself allows you to design a home that is both aesthetically attractive and functional for your own circumstances and, more importantly can potentially save you plenty of money.

In fact a self build home could save you around a third of the overall costs on that of a ready-built property.

What are Self Build Mortgages?

Even though the economic climate has meant that home mortgages are a little more difficult to come by, it has also meant that land prices have taken something of a dip in price, so there are still opportunities if you think a self build property could be for you.

Unbeknown to many people however, self build mortgages are a little more complicated to apply for and get when you compare them to the more traditional home mortgage route.

This is because with traditional mortgages lenders have a tangible asset to lend against, they can see the type and size of the property, assess the value and determine the potential risks to their loan before the mortgage is agreed.

However, with self build projects the only tangible asset is the land itself and making it harder to determine the value and assess their finance risks.

Because of this self build mortgage lenders will need to see full plans for the property itself together with details of all planning permissions, building regulations consents, and all project finances including building costs associated with the project.

It is important to understand that most self build mortgage lenders will require you to have full planning consent in place for your project before they will even consider your application.

Staged Release of Self Build Funds

You may question the reasons as to why you cannot get a traditional mortgage if you are building your own home and why it has to be a specialist self build mortgage product.

Apart from the increased risk to the mortgage lender, one of the main reasons is because the money that you will be borrowing is released over a period of time and not in one go, usually at specific stages during the course of the building project.

For instance, with self-build mortgages money will be released at pre-agreed key stages of the construction project in order to fund the build and keep it on-track.

Release of Mortgage Funds in Advance or Arrears?

Self builders can either opt for the mortgage finance to be made available at the beginning of each pre-agreed key stage, which is referred to as the “advance stage system”, or they can choose for it to be released at the end of each stage, which is known as the “arrears stage payment system”.

  • Advance Stage Payments

    Under the advance stage system of self build mortgage the borrower will have access to funds at the beginning of every agreed phase of building works.
    This is a popular option for many self builders who are keen on controlling cash flow and require the lenders cash to progress.

  • Arrears Stage Payments

    The arrears stage payment system is more for people who have a large amount of cash to inject into their self-build project in the first instance, as mortgage lenders will not release any money until each agreed phase of the building works has been finished.
    A surveyor acting for the self build mortgage lender will usually check whether the construction work has been completed before the lender will release the cash allowing you to move onto the next stage.

Choosing a Self Build Mortgage Lender

One final note, when it comes to choosing a mortgage lender to fund your self build dream, make sure you shop around for the very best deals.

It may sound obvious, but some people tend to rush to get things off the ground quickly and then later regret opting for a particular lender because they realise could have got a better deal somewhere else.

Self Build Finance & Other Fees

Remember, there are also fees associated with self build mortgages that you will be expected to pay, so you should make provision for theses in your budget.

Costs such as arrangement fees, stage inspections and valuation fees have all to be taken into account.

Specialist Self Build Mortgages & Property Finance Solutions

As a leading independent property investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are searching for specialist self build mortgages or other property finance solutions please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about self build homes… here →

More information from the UK’s National Custom & Self Build Association (NaCSBA) whose aim is to promote self build and custom build homes in the UK… here →