In this guide, you’ll find self-build mortgages explained clearly and concisely, so you can get to grips with the topic and find out if it’s the right path for you.
Building your own home is a very real possibility and there are self-build mortgages available that can help you do just that.
Wondering how self-build mortgages work? It can be tricky to navigate the landscape, as they’re unlike traditional mortgages since payments are released in stages to reflect the progress of the project and the increasing value of your home as you near build completion.
In this guide, you’ll find self-build mortgages explained clearly and concisely, so you can get to grips with the topic and find out if it’s the right path for you.
Want to know what a self-build mortgage is? You’ve come to the right place. Here, you’ll find video content, FAQs and expert guidance to steer you in the right direction and help you build the home of your dreams. If you’d like to find out even more, get in touch with the Create Finance team today.
Can you get a mortgage for a self-build project? The short answer is yes! But it can be difficult to find the best deal for you and your circumstances, especially if you’ve never worked on a project of this kind before.
The requirements for a self-build mortgage can be very strict, depending on the lender, and it may be that your application isn’t accepted for a variety of reasons. For example, some mortgage providers won’t lend on some construction systems, which can make it harder to gain access to funds.
Using a mortgage broker can help make the process easier to facilitate. They will also be able to help you find the best deals, helping you to manage costs more effectively.
Create Finance’s team of specialist brokers have access to a comprehensive range of lenders, ensuring that all our clients are able to find the best mortgage deals to suit their specific circumstances.
Yes! First-time buyers are able to access self-build mortgages, but lenders can be more cautious because these projects are riskier and unfinished homes are harder to sell if, for whatever reason, the build isn’t completed.
You do need a deposit for a self-build mortgage and having a bigger deposit and a good credit history, as well as proof of reliable income, can increase your chances of approval.
The amount you can borrow for your self-build mortgage will depend on your financial circumstances, so it’s different for everyone considering building their own home. Your income and outgoings will be used to work out how much you can borrow, including any outstanding debts you may have.
Typically, you are able to borrow up to 75% of your total project costs, or potentially even more than that if you already own the land. Each lender will have their own maximum loan amounts, so shopping around is key.
An affordability calculation will be carried out to assess your borrowing limit, including credit card and loan debts, as well as childcare costs. If a mortgage is not considered to be affordable, it will not be granted.
Self-build mortgages cover anything and everything linked to your project, whether that’s buying the land in the first place, investing in building materials or paying your team of contractors.
There are two types of self-build mortgages: arrears mortgages and advance mortgages. The former would perhaps be best for those with a large amount of readily available cash to finance part of the project.
Advance mortgages, meanwhile, may be better for those who are reliant on the mortgage to fund their project. However, these mortgages are not easy to access and the rates may not be as competitive.
You are able to take out a self-build mortgage if you already own the land - and the good news is that it can make the process a lot easier if you’re in this situation. Because the plot is already yours, you may also find that you actually need to borrow less, making the project more cost-effective and easier to manage.
It is also possible to use the land as collateral, with lenders taking the value of the plot into account. If you have planning permission already in place, you may also be able to borrow more.
Think carefully before securing debt against your home, your home
may be repossessed if you do not keep up repayments on your mortgage.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The overall cost for comparison is 4.8% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
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