Types of Self Build Mortgage
Some mortgages provide funds upfront to purchase initial materials or release down payments to contractors. It is vital to consider your cash flow requirements throughout the self-build project before deciding on the right mortgage lender for you. Self-build mortgages are available for any type of self-build, generally brick or timber frame buildings. If you are considering an innovative project or using unusual materials, you may require a niche lender.
How Do Self Build Mortgages Work?
Examples of the stages at which each tranche of funding is released could include:
- The purchase of the plot of land
- Initial completion of foundations
- Framework erected
- Property is made water and windproof
- The initial interior is completed
- Project is completed
Finding the Best Self Build Mortgages for a Land Purchase
Mortgages are available to purchase a plot of land and are usually dependant on the right planning permission being in place. Lenders can finance varying values of the land – typically between 50-75% of the value of the plot. If you have existing finances available to fund part of the project, it is usually most cost-effective to save these funds for the building project, since this helps to reduce the number of tranches required and expedite the mortgage process whilst minimising fees.
The Pros and Cons of a Self Build Mortgage UK
Advantages:
- Usually lower cost to build your property than to purchase a ready-made equivalent
- Lower stamp duty, since this is payable only against the land purchase
- No stamp duty is payable if the plot of land costs less than £125,000
Disadvantages:
- Mortgage fees and interest rates can be higher than standard residential mortgages
- A higher deposit is required, usually from 25% of the build project cost
- Detailed plans and planning permissions are required for mortgage lenders for self-build mortgages
- Additional accommodation costs during the building project
Self Build Mortgage Rates
Depending on the lender usually self-build mortgages carry higher interest rates than residential mortgages, so choosing the right scheme is essential. The ideal scheme will not carry penalties, and allow you to remortgage once the build is complete. Using a mortgage advisor, such as the team at Revolution Finance Brokers, has the advantage of providing access to the most competitive schemes on the market, as well as the negotiating power to achieve the most advantageous rates and terms.
Choosing a Self Build Mortgage
Self-build mortgages are a specialist product and should be selected from the smaller number of lenders who offer this type of mortgage. Here at Revolution Finance Brokers we have extensive experience in securing self-build mortgages, and would be delighted to help you get your project off the ground! If you aren’t sure which lender to choose, don’t know what sort of self-build mortgage is right for you, or need support in planning the budget for your dream home, give us a call today!
Self Build Mortgage Already Own Land
If you already own a parcel of land, you can usually still get a self-build mortgage. The main difference is that you won't need to apply for any borrowing to purchase the land itself and purely for the construction costs.
Lenders will usually want an updated valuation to know what the security is worth and check whether you have planning permission in place.
It's often challenging (if not impossible) to get past any stages of a mortgage application without the requisite permission. We'd also advise completing the planning approval process before the valuation - land with planning consent is often worth considerably more than a comparable asset with no permissions.
If you aren’t sure which lender to choose, don’t know what sort of self-build mortgage is right for you, or need support in planning the budget for your dream home, give us a call today.
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2023-05-09 
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