Financing your self-build project

Five bedrooms, two with en-suites, one with a balcony, two downstairs reception areas, bi-folding doors leading out to a two-tier garden, complete with waterfall feature and homegrown vegetable plot, all wrapped up in a Scandinavian exterior. Sound nice to you?

Creating your dream home that’s totally unique may sound amazing as you get to choose exactly what you want, rather than making do. However, it’s important not to get carried away with the idea of it and forget the practicalities too, such as, how are you going to finance your self-build home?

How much does it cost to build my own home?

Finding out how much it’ll cost to build your own home is the first step as this determines how much money you’ll need to borrow and whether you can afford it. The cost of the project depends on various different factors such as, the size of the plot, the materials you want to use, the project management style you choose (are you going to do it yourself or hand it over to someone else?), not forgetting the final stage of decorating and furnishing.

Financing your self-build home

Unless you’re fortunate enough to have the cash upfront, you’re likely to need a mortgage to fund your self-build project. But first things first, you need to work out how much money you have available to you. You can do this fairly easily by listing:

1. How much savings you have
2. How much money you can make from selling your current home (if you own one already)

Once you’ve worked out what this figure is, you can then look into a self-build mortgage and see how much you could borrow. It’s also worth noting that you often have to put down a larger deposit for a self-build mortgage than you do for a standard mortgage. A typical deposit might be 15 - 25%, but this will vary depending on the lender’s requirements.

If you’ve already sold your house then you may have to pay for temporary accommodation until you can move into your new self-build home. Make sure you’ve factored this expenditure into your monthly budget.

Self-build mortgage

Mortgages for self-build homes work slightly differently to mortgages for existing homes. When you think about it, it’s totally understandable that you might have to tick a few more boxes to get mortgage approved, as you’re essentially asking the lender to lend you a large amount of money for something that they can’t even see, because it doesn’t exist yet!

The main difference with a self-build mortgage is that the funds are released to you in stages, rather than in one lump sum as they are with standard mortgages. This is purely to make sure that you don’t spend all the money at once and then run out. By releasing it in stages, the lender can see that you’re spending each amount as you intended to. As a rough guide, you can expect to receive the first payment when you buy the land, the second when the foundations are laid, the third when the actual build starts.. You’ll receive the final payments when the walls and ceiling have been fully plastered and the roof is water-tight.

Self-build mortgage broker

Interest rates on self-build mortgages tends to be higher than on standard mortgages, so it’s important that you do your research well before you decide which mortgage is the one for you.

At Mortgage Advice Bureau, we offer a range of specialist mortgages, including those for self-build projects. You can sit down and speak to one of our qualified mortgage advisers, explain your plans and we’ll find a mortgage that we think is right for your circumstances.

Often with self-build mortgage applications, there is more paperwork to fill out as you’ll have to submit your plans e.g. planning permission, financial forecasts for the costs you’re likely to incur etc. Our mortgage advisers will take care of the whole application, from beginning to end, including dealing with any paperwork required, leaving you to concentrate on the exciting bit, the self-build project itself!

For expert advice from BuildStore Mortgage Services on how to finance your self-build or renovation project, complete the enquiry form by clicking here.

Alternatively, you can download Buildstore's Self-Build Finance Brochure here.



Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

Need more help?

Contact us