Self Build Mortgage

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Is it hard to get a self build mortgage? 

Obtaining a self-build mortgage isn’t as hard as you may think, but it is more challenging than a standard mortgage as there’s a lot more information that the lenders require as it’s to do with the actual build, not with the physical property.

Are self-build mortgages more expensive?

The interest rates for self-build mortgages are very comparable to other forms of mortgages on the market, but it ultimately depends on the rates at the time. How you fund your build will also affect how much you pay. You can either have fixed or variable rates which are similar to residential mortgages however, generally you would draw the mortgage in stages thus only incurring interest on the amount outstanding at any one time. You can also pay either a full repayment amount or on interest only 

With self-build houses, there are other fees that you need to take into consideration, such as valuation fees, building regulation fees and planning fees for the permission you need to obtain to start building your property.

Do you need planning permission for a self-build mortgage?

Yes, you need outline planning permissions as an absolute minimum requirement. You will often find that land is sold with planning permission already in place. If you bought a piece of land without any form of planning this is a huge risk, if you do not obtain planning, you could be left with land that is virtually worthless. So in order to buy the land with the assistance of a mortgage, outline planning is required and if you have the land already you will need outline planning as a minimum to get a mortgage for the build.

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Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.

Do many lenders offer self-build mortgages?

There are roughly 30 lenders in the market that offer self-build mortgage products,  however, apart from the odd one, most of these are smaller banks or building societies or specialists in the field of Self Build. Fundamentally, it comes down to your plans, required mortgage and your circumstances as to which lender is available to you.

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

With a normal residential mortgage, you have your deposit, your income meets the lender’s requirements and all the background checks have been completed and you have a mortgage within a few weeks.

With a self-build mortgage, you need to have a lot in place, such as planning permission, costs for your build plus your work plan and whether you own the land.

What are the stages of a self-build?

Once the mortgage is approved and plans are in place, the lender will release the money in stages when you hit a certain element of the build. So initially you may have the purchase of the land, then you have the preliminary costs such as foundations. The lender will release funds at the end of each stipulated stage.  

The lender will often send out an assessor to view the stages of the build process to ensure it is complete. Generally, there are around 5 or 6 stages when money is released on the build. The positive side is that you’re only paying back the money you have taken out at that stage of the build, It will increase the further along you go, however.

How long does it take to get a self-build mortgage?

On average it takes roughly 3 months from the initial application to the mortgage being ready. However, this can take longer depending on the process of the land purchase or background checks on the individual.

Do you need to own the land for a self-build mortgage?

Not necessarily, you can borrow on a mortgage for the purchase of the land.

Can you use land as a deposit for a self-build mortgage?

There have been examples in the past where this has happened, but you would still need to fund the start of the build. This normally happens when the land has already been obtained, whether this be by purchase or gift, but the planning or outline planning would need to have been obtained.

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

Most lenders require a 25% deposit to purchase the land, then a minimum 25% deposit or contribution towards the build costs. However, some lenders may require a 40% deposit, but this is dependent on the market and risk factors.

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

It is possible, but there are certain checkpoints for any property when this is being built. Building regulations will have to be signed off, valuers happy once assessed and the build is of sound quality. If this has been signed off before you need the additional capital, then it should not be an issue.

Can you get a mortgage on a half-built house?

It is possible, but there are certain checkpoints for any property when this is being built. Building regulations will have to be signed off, valuers happy once assessed and the build is of sound quality. If this has been signed off before you need the additional capital, then it should not be an issue.

Speak To An Expert

Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.

What credit score do you need to buy land?

You have to ensure your credit score and history is good as it will be checked. You may find you have a good rating, but you don’t meet the internal scorecard your lender requires. This is why we recommend a 25% or higher deposit, but with any mortgage, the more you put into your deposit, the higher chance of being accepted even if you have a slightly poorer credit score.

How are self-build mortgages calculated?

Self-Build mortgages are calculated on a repayment basis, so when you’re paying back the mortgage, some of this will pay the capital and some in interest. At the end of your build, you may find your lender will convert your self-build mortgage into a residential mortgage, or you would need to do this yourself or get your Mortgage Consultant to do this for you.  There are some lenders who would agree to just the interest being paid, however these do require, in normal circumstances, there to be a repayment strategy in place, and this cannot now generally be the remortgage or sale of the property being built.

How are self-build mortgages calculated?

The costs of a self-build will always be more than buying an already established house, more so if you’re looking at the higher property prices.

A good example of this is where we had a client who spent £150,000 on a self-build and the house is now worth £300,000. They weren’t able to afford a mortgage on a property of this value, but with a self-build, they now have a house in their own specification at the value they wanted.

How are self-build mortgages calculated?

Borrowing money, whether it be for a purchase of a standard property or a self-build property, you have to have the income behind you. With self-builds, do your homework, have your estimates, figures, plans, everything in place before you apply for a mortgage. Lenders will have a tick list that they work on, with some lenders being more lenient than others. 

I would also recommend speaking to a trained advisor so you know where you stand and they can run through your plans. They can also advise on the best product in the market and suggest where to start.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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