Self-Build Mortgages: Build your dream home. 

Blog written 30/08/2023 

Build your dream home. Have you always dreamed of building your own home? A self-build mortgage could help your dream become a reality. 

We understand that mortgages can be confusing especially with the added complexity of building a house and complying with different regulations & agencies. We can help you to understand your options and how this type of mortgage works to ensure your finances run smoothly. 

Conventional mortgages are only available on houses that are already built. If you want to build your own dream home from the ground up, you will need a self-build mortgage.  

Self-Build Mortgages: What is a self-build mortgage? 

It is a mortgage loan that is released in stages. There are 2 main options to choose from: advance or arrears stage: 

Arrears-stage payment (most common) 

Mortgage funds are released when a stage is complete. The borrower will need to rely on their own funds to pay for the cost of each stage upfront. The lender will usually appoint a professional valuer to assess the value of each stage and they will release an agreed percentage of the stage value. 

Advance-stage payment 

Mortgage funds are released at the start of each build stage (before the work goes ahead). The funds are agreed in advance based on projected build costs and are guaranteed irrespective of any valuations carried out by the lender. This option requires greater cost diligence before going ahead with the project. 

What are the stages involved in a self-build mortgage? 

The stages can vary between lenders but they are generally: 

  1. Land purchase 
  1. Groundworks to damp proof course 
  1. Masonry to eaves level 
  1. Wind & water tight 
  1. First fix and dry lining 
  1. Certificate of completion 

What happens when the build is complete? 

Like a conventional mortgage, a self-build mortgage will have an initial promotional deal and may have early repayment charges if you leave the deal early. At the appropriate time we can advise you on your remortgage options and you will revert to a conventional mortgage. 

Advantages of a self-build mortgage: building your dream home 

It may cost you less to build a house than buy one of an equivalent size. 

You can build a property to exactly meet your needs. 

You may not have to pay stamp duty or may pay less stamp duty when purchasing a plot of land. Stamp duty is not charged on land costing less than £250,000 (correct as at 30/08/2023).

Disadvantages of a self-build mortgage: building your dream home 

During the build you may pay a higher interest rate than a conventional mortgage. 

You may need a larger deposit for a self-build. 

There is more paperwork! In addition to the usual proof of income & expenditure, the lender will require full details of your project costs, project insurance & structural warranty. 

If you require any further information or advice on self-build mortgages, please contact us. 

Your home may be repossessed if you do not keep up repayments on your mortgage 

The information contained within this blog was correct at the time of publication (30/08/2023), and is subject to change. 



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