If you're looking to create your dream home, constructing it yourself is an amazing way to make that happen. Of course, much of the process involves budgeting and financing. A self build mortgage is an ideal way to finance this project.

How self build mortgages work

Self-build mortgages are a type of mortgage that allows the buyer to access funds for constructing their own home, rather than buying an already-built property. A specialist self build mortgage lender may want to see the planning permission for the construction of the property. A self build mortgage application works similarly to a traditional mortgage, however, they do differ slightly as there isn't an existing property to use as collateral.

These mortgages differ from traditional ones in that they require the lender to release the money in instalments, rather than as one big lump sum. This is because with self-builds there is no property to offer as security until after the construction is complete.

Different types of self build mortgage

There are two main types of self-build mortgages: advance and arrears. With an advance mortgage, they pay upfront and funds are released at the beginning of each stage to fund the build costs, while with arrears mortgages they only release money when the work carried out is done and each stage is complete, this will cover the total cost.

Both types require different levels of deposit and savings, so make sure to read the fine print carefully when choosing one. Not many lenders offer this type of mortgage product but different lenders have these mortgage products available, however, you will have to meet the lender's criteria to qualify for a self-build mortgage.

Other options such as bridging loans can be used to cover any up-front costs if you don’t have enough savings on hand. Ultimately, self-build mortgages are a great way of financing your dream home, but make sure to research thoroughly and get advice from professionals before making a decision.

Benefits and drawbacks of a self build mortgage

Constructing your own home is a good way to save money compared to purchasing from a developer. It also allows you the flexibility and freedom of designing the perfect home for you.  On top of this, you only pay stamp duty on what was originally paid for the land- not the value that it has been transformed into when completed!

When it comes to building your own home, one of the biggest drawbacks is finding a suitable plot. Moreover, you must bear in mind you will need to find somewhere else to live when constructing your house which would add extra cost.

Managing your self-build project can be stressful and time-consuming, this is a factor you should consider.

Do I need a self build mortgage?

Self-build mortgages are a great way to finance your dream home, but they come with their own set of considerations. It's important to do your research and get advice from professionals before committing to one.

You'll also need to be prepared for the unique cost structures associated with self-build finance, including deposits, instalments and bridging loans. With the right planning, you can make your dream home a reality with a self-build mortgage.

This can be a complicated process as you will need a plot of land and planning consent to build a new property rather than purchase an existing home. There are different rules for this type of mortgage such as the additional documents that are requested by a specialist type of lender. A self build home will require a lot of organisation you will need to contact suitable people to discuss construction methods, the estimated build cost and outline planning permission.

It’s important to remember that with self-build mortgages it’s essential to carefully plan your project from start to finish as any delays or cost overruns can be expensive. You should also make sure you obtain the necessary planning permissions and building regulations before starting any work. Finally, don’t forget to factor in additional costs such as interest payments and insurance policies which will need to be taken into consideration.

How much can I borrow? 

Securing a mortgage for your self-build must start with having an accurate budget for the whole project, including funds to cover unplanned expenditures. Each lender has their own guidelines on whom they will accept for this kind of loan so make sure you are aware of them before submitting your application.

The amount you can borrow will be based on your income, outgoings and the size of your deposit. 

If you need to borrow money then finding the right mortgage for your build is crucial to ensuring the success of the project. Finding the right mortgage broker will help to get a self build mortgage easier. Good luck with your self-build project – it may not always be easy but with careful planning and the right mortgage, you can make your dream home a reality.

If you are looking for a self build mortgage, contact us at 0151 662 0188 or email [email protected]