Self-Build Mortgages

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Self-Build Mortgages

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Self-Build Mortgages – Some Tips

You might be thinking about building a house and wonder what mortgages are there for this situation, knowing a standard mortgage requires a property to be built – the answer is a self-build mortgage. You can get stage payments to help you build your dream home while you live in your existing home with the help of a self-build mortgage!

What is a self-build mortgage?

Self-build mortgages are for those who want to build their own home but might need the mortgage to get started. These types of mortgages will see funds released at key points of the build project rather than in one lump sum when it is finished.

The rates are usually higher on self-build mortgages as opposed to residential mortgages, the fees and rates will obviously differ between lenders. Some lenders will even lower the interest rates once the build is habitable.

What types of self-build mortgages are available?

You can get two types of self build mortgage products, the arrears or the advance type.

Arrears Type

If you have a good amount of cash to put into your self-build, you might not need all of the money up front to start your build. The arrears type of self-build mortgage money is released when stages of your project are completed.

Advance Type

The advance type will get you payments at the beginning of key points in your build. The money will be there right when you need it for things such as materials. The lenders who offer this option are limited however and you may need to seek the help of an expert mortgage broker to find them.

The option that is best for you will depend upon your situation, both can help eliminate the need for a short-term loan for example a bridging loan, whilst carrying out building works.

How do I assess the cost of my self-build project for my mortgage application?

A mortgage lender is going to want a breakdown of estimated costs and overall costs when it comes to your project. There are build cost calculators that you can use to find an estimated figure of what you are planning on building. Aim to have a financial buffer in case something goes wrong during your project.

You should assess the following costs:

  • Land purchase fees and any fees that come with the purchase
  • Health and safety and project management
  • Design fees – architect fees
  • Construction costs
  • Site preparation and valuation fees.

Budgets are so important and lenders will take them seriously, if it is not detailed and exact a lender will not waste their time with it. There are expert quantity surveyors out there who will be able to give advice and certainty to your plans. 

How much can I borrow for a self-build mortgage?

The amount that you can borrow will highly depend on your own financial situation and credit score. Lenders will look into your credit report to assess if you are reliable when it comes to borrowing money.

What can impact the chances of getting a self build mortgage?

You need to make sure that you can afford to keep up with your regular outgoings especially if you are still paying a mortgage in your current residential property. Lenders will take into account that you are going to be paying this. If you do not keep up with monthly repayments on your current mortgage, then your home may be repossessed.

As mentioned before the budget is so important as lenders may require you to stick to the plan you layout in front of them. Every lender is different, so it is important to look into the criteria of the lender.

What supporting documentation do I need for my application?

You need to have the same documents that you would need for a standard residential mortgage. As it is a self-build mortgage you may need extra documents too; this includes:

  • Copy of planning permission
  • Copy of drawings and specs
  • Estimated costs and fixed-price contracts
  • Copy of the building regulations approval
  • Architect’s cover
  • Standard assessment procedure calculations
  • Copy of any insurance for labourers
  • Structural warranty
  • Credit report.

How can IMS help me? 

A mortgage expert can help ensure you have everything you need for your self build mortgage application as well as guiding you to a lender that suits your wants and needs too. The documentation process can be lengthy and complex. At IMS we have experience and can take the stress out of the process for you.

There are many different mortgage deals out there and lenders too that are not authorised and regulated by the Financial Conduct Authority.

There are many types of mortgages that can be more flexible than those offered by building society and banks. IMS can take the stress out of the search with access to the independent mortgage market, our experts are on standby to offer tailored advice and an adviser for any questions you might have when it comes to mortgages.

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.