Getting a self-build mortgage isn’t as difficult as you may think, but more is required than a standard mortgage as lenders need extensive information on the actual build.
Are Self-Build Mortgage Rates Higher?
Rates are very similar to other mortgages available at the time. How you fund the build affects costs. You can have fixed or variable rates like residential mortgages, but usually draw funds in stages, so only pay interest on outstanding amounts. You can also choose full repayment or interest-only.
There are extra fees – valuation, building regulations, planning permission.
Does A Self-Build Mortgage Require Planning Permission?
Yes, outline permission is an absolute minimum needed. Often land is sold with permission in place already. Buying land without any permission is very risky if you then can’t get approval. Mortgage lenders require outline permission on land already owned too.
Lender Availability
Around 30 lenders offer self-build mortgages. Most are smaller providers or specialists. The exact plans, mortgage required and your circumstances determine available lenders.
Application Process
With standard mortgages, approval often takes just weeks once deposit, income, credit checks are met.
Self-build mortgages need more in place first – planning, costings, work schedule, land ownership.
Stages Of A Self-Build
Once approved, lenders release funds in stages when certain milestones are reached. For example – land purchase, foundations, roof.
A lender-appointed assessor often inspects each stage before funds release. Typically 5-6 staged payments in total. You only repay drawn amounts, increasing through the build.
How Long Does Mortgage Approval Take?
Around 3 months from application to offer is average. Can take longer depending on land purchase or applicant checks.
Do I Need To Own The Land?
No, you can borrow to purchase the land.
Can Land Count As Deposit?
Sometimes, if planning permission obtained and initial build costs covered.
Deposit Required
Most want 25% to buy land, then 25%+ towards build. Some lenders require 40% total. Depends on market and risk.
Increasing Loan Mid-Build
Possible if building regulations signed off, valuation confirms quality build.
Mortgage Calculations
Self-build mortgages are usually repayment, so contributions pay capital and interest. At completion, the lender may switch to a residential mortgage. Some lenders offer interest-only with a repayment strategy.
Cost V’s Buying A Home
Self-builds cost more than buying, especially at higher values. Building your own specification can allow you to afford a higher end result.
Ensuring You Are Accepted
Do your homework, have all estimates, plans, finances in order before applying. Speak to a broker for advice on products and where you stand.
