Mortgage Advice - Self-Build

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Self-Build Mortgages

With a traditional self-build mortgage, stage payments are made in arrears which means that you either have to secure a bridging loan or fund the initial stages of your build yourself. With an advanced flexible self-build mortgage, stage payments can be made in advance of each stage, thus helping you to avoid the cash flow problems common in self-build projects.

The advanced flexible self-build mortgage can be used for both traditional and timber frame builds, as well as for renovation and conversion projects. Typical stage payments will include land, foundations, wall plate or erection of the timber frame, watertight/roof on, plastered and completion.

As with a traditional mortgage, how much a lender will be prepared to advance you will depend upon your ability to repay. The usual calculation will be worked out on multiples of the incomes of the people who will be responsible for repaying the loan.

The key features of an advanced flexible self-build mortgage include:

• Up to 95% of the land purchase price or valuation.
• Up to 95% of the building costs.
• Up to 95% of the end value.

Stage payments can be made in advance, although you should be aware that sometimes a higher percentage advance fee is imposed, usually when a client is borrowing up to the 95% maximum at land stage.

Funds on land purchase can be released with Outline Planning Permission.

Self build: Benefits

The main benefits of this type of mortgage are:

• You do not have to have a bridging loan and therefore this removes potential cash flow problems.
• It helps to speed up the build.
• You can remain in your existing home during the construction phase. Funding for the land purchase will become available once Outline Planning Permission has been received and the funding for building costs becomes available once full Detailed Planning Permission has been granted.

During the build stage, interim valuations will be made prior to funds being released and all new builds must have a suitable structural warranty such as an Architects Supervision or NHBC Guarantee.

Before any funds can be released, site insurances must be in place.

Next: More information on self build mortgages - how they work >>