Design your dream home with a self-build mortgage

Unlike a traditional mortgage for an existing property, funding your self-build project necessitates a different approach – the self-build mortgage.

What is a self-build mortgage?

The key difference between a standard residential mortgage and a self-build lies in how the funds are released. Instead of receiving a lump sum, a self-build mortgage disburses the money in stages, aligned with the construction phases. This reduces the lender's risk and ensures the funds are used as planned, mitigating the risk of running out of cash midway through the build or the borrower redirecting the funds.

Benefits of a self-build mortgage

So, now you’re aware of the function of a self-build mortgage, what are the benefits of taking one out to build your dream home?

Flexibility

You have more control over your budget and can adapt the build as needed within the agreed-upon specifications.

Tailored options

Depending on your specific needs, lenders offer various self-build mortgage products with features like interest-only payments during construction.

Potential Stamp Duty Savings

Stamp Duty Land Tax is subject to the value of the land, not the value of the property once the construction work is complete.

Drawbacks a self-build mortgage

Whilst the idea of building your dream home may seem ideal for you at first glance, it’s important to consider some of the possible drawbacks.

Higher interest rates

Compared to traditional mortgages, self-build mortgages typically have higher interest rates. This is due to the increased risk for the lender.

Eligibility requirements

You'll need to pass credit and affordability checks, and present a detailed project plan along with planning permission and building regulations approval.

Deposit requirements

Expect a larger deposit compared to a standard mortgage, often ranging from 30% to 40% of the build cost.

Mortgage advice

Consulting a mortgage adviser specialising in self-build mortgages is crucial to navigate the process smoothly and secure a good deal for your circumstances.

Building your own home is a complex but exciting undertaking. While a self-build mortgage can help you finance your dream, it's crucial to thoroughly research, seek professional advice, and meticulously plan to ensure a successful, and financially sound, project.

Speak to a self-build mortgage adviser

Important information

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 on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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Why buy a new build house?

Just like everyone has their own style when it comes to fashion, it’s the same when it comes to houses. Some people prefer period houses that have character and unique features, whereas others might prefer a new build property with a clean, modern look and feel that you can make your own.