If you are looking for information on how to finance your self build or renovation project you’re in the right place. Here we specifically talk about self build mortgages.

What’s different about a self-build mortgage?

In a conventional mortgage the provider lends the total value of the house upfront. In a self-build mortgage instead of receiving all the money at the start, the loan is released at key stages as you build.

What are the key stages?

Funding is released on completion of the foundations, to wallplate level, weathertight, first fix, second fix and final certification from a building surveyor. Some providers lend on the land purchase too.

Is there more than one type of self-build mortgage?

Yes there are many ways to finance your self build project. An advanced stage payment mortgage is where funds are released before each stage begins to help cashflow to buy materials and pay trades. Arrears stage payment mortgages issue payments after each stage is completed and signed-off – so you’ll need a pot of money to get started. More lenders offer this type of mortgage.

Is there a choice of products?

Yes. Repayment and interest-only mortgages with fixed, variable, discounted, tracker in varying interest rates. Be aware that interest rates will be higher than conventional mortgages as there’s more risk to the provider. You’ll still have a tie-in period and you’ll still have to pay an arrangement fee.

How quickly can I move onto a lower interest rate?

You’ll need to stick to the terms. Some lenders allow you to move to a lower interest rate or convert to a conventional mortgage once you’ve moved in and your house has been signed-off by a building surveyor.

How much can I borrow to finance my self build?

This is hard to say as it depends on your circumstances. The amount is broadly three-and-a-half to four times your income but takes into account your monthly outgoings. This includes your living costs while you build eg. buying a caravan, rent or paying the mortgage on your existing home.

What kind of deposit will I need?

Lending is based on Loan to Value (LTV) like a conventional mortgage. For a self-build mortgage, the ratio is worked out as a percentage of the land cost plus build cost or the valuation on completion, whichever is lower. LTVs vary from lender to lender – currently LTVs on land range between 50-85% and for build costs you can borrow 75-85% of the end value.

What information does a lender need in my application to finance my self build?

Each will have their own criteria, but at the very least you’ll need to show the design, planning permission details and confirm the construction method. A realistic design and build cost estimate is essential. This must also include a 10% contingency, and all associated costs such as planning, surveys, warranties, insurances. You may need to provide a professional cost estimate issued by a quantity surveyor.

What do I need to watch out for?

• Check the provider lends against your construction method
• You may have to use a building contractor for your project
• You may have to provide site insurance and a ten-year structural warranty before the lender starts releasing funds
• You may have to finish the house within a set timeframe
• Check your builder, suppliers and trades can work with the payment terms of your lender
• Lenders will often hold back 10% of the total sum until the completion certification is issued

Where can I get a self-build mortgage to finance my self build?

Buildstore offer a wide range of mortgages whether you are building your own house or renovating your current house.

Build It magazine update a self-build mortgage list at the back of their magazine every month. Or click here where you can find the aforementioned lenders and a number of others offering arrears stage payment mortgages.