Self-Build Mortgages

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Self-Build Mortgages

If you’re thinking about building your own home, a self-build mortgage is the standard way to finance it. We can help you compare the options and start budgeting for your build.

Is it cheaper to build your own house or buy a house?

People opt for a self-build because the cost to build a home from scratch is usually lower than buying an existing property. Obviously, though, it takes a lot longer to buy land, arrange permission and manage the construction than simply buy a home. While self-build can be demanding and stressful, most people find it to be a very rewarding journey.

Will a bank finance a fixer-upper?

The key thing with self-building is that mortgages are only available on a ‘habitable’ home – which means it needs to have a working kitchen and bathroom. If you are building from scratch or knocking down parts of a property, making it uninhabitable, you will need a self-build loan rather than a mortgage.

Is it hard to get a self-build mortgage?

A standard mortgage gives you a single lump sum to buy a home, while a self-build mortgage releases the money at stage by stage as your building work progresses. 

Getting a self-build mortgage isn’t necessarily difficult, but there is a lot to research and prepare upfront. It helps to have a mortgage advisor to help you through.

Are self-build mortgages more expensive?

The main challenge with a self-build mortgage is that they are less widely available than a traditional mortgage. Because there’s therefore less competition in the marketplace, interest rates can be higher.

But the main purpose of self-build is that building a home is much cheaper than buying one – so remember, you’ll be saving money that way. 

Do you need planning permission for a self build mortgage?

Yes – usually a lender will only approve your borrowing if you already have planning consent on the land.

Do banks do self build mortgages?

Some banks offer self-build mortgages but the market is changing every day. The fastest and most thorough way to find a self-build mortgage is through a mortgage broker.

How much deposit do I need for a self build mortgage?

Again, lender requirements do vary, but the standard is to put in around 25% of the build cost yourself, so that the lender isn’t exposed to the full risk.

If you have other property, you may be able to use it as security rather than having to find a cash deposit – but again this is something we can advise you on. 

How does the application process work for a self-build?

Getting a self-build mortgage can take longer than a mortgage, and you will need more documents and plans. Some lenders will expect you already to have bought the land, while others will potentially lend you the money to buy your plot. 

You will need the following ready before applying:

  • Your credit report
  • Copy of planning permission
  • Construction drawings and specifications
  • Total project cost estimate – with fixed-price contracts where possible
  • Building Regulations approval
  • Self build insurance and structural warranty

What are the stages of a self-build?

Funds are typically released at key stages within a self-build schedule, which might include:

  • Buying land (with outline planning permission at least)
  • Completion of substructure
  • Wallplate/eaves height (just before the roof trusses go on)
  • Wind and watertight, roof tiled
  • First fix
  • Second fix
  • Certified completion

What credit score do you need to buy land?

Every lender has different criteria, but often you won’t need a perfect credit score to borrow for a self-build mortgage. Defaults and CCJs may be overlooked depending on their value and the timing. Very severe credit issues could cause a challenge, but your mortgage broker will be able to advise based on your specific situation. 

How can Mortgages by McAteer help me with a self-build mortgage?

We have helped many clients get the finance they need to build their own home. The big appeal of a self-build is that you can get the home you want at a much more affordable price. 

The secret is to make sure you have a good team behind you – including reliable builders – and that you have a decent contingency budget. Every build has some form of unexpected challenge.

We will guide you through the whole process, whether you have already found a piece of land or need funding to buy one. We can connect you with qualified professionals and help make sure your plans are as robust as possible, and ready to find a suitable lender. 

Approved by the Openwork Partnership on 24/04/2024