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Self Build Mortgages

There are now many flexible self-build mortgage options on the market. It used to be that traditional self build mortgages released payments in stages, and usually in arrears, which means the client has to fund initial costs themselves.

Self build mortgages and self-build mortgage finance can be arranged through specialist lenders to help towards the purchase of land and release funds to you as the property progresses. Options available in the self build mortgages market today:

  • Land purchase/valuation and timber frame kit or traditional self build – up to 95%
  • Build costs – up to 95%
  • Stage payments released in advance
  • Progressive funding
  • Access to all the lender’s products
  • Flexible underwriting for self-build finance

The benefit of stage payments requires no bridging loans and removes cash flow problems, which are common during self-build projects. Self-build mortgages are available that release funds in advance of each stage of the project – from purchase to construction to finishing. The timescale of the self-build project is therefore accelerated. Stage payments self-build mortgages provide progressive funding thus allowing the client to remain in their existing home during the self-build. Of course, the ability to purchase a timber frame kit in advance of delivery is an absolute plus, reducing worry and stress!

Self Build Mortgages: Summary

The main difference between a self build mortgage and a house purchase mortgage is that with a self build mortgage, money is released in stages as the build progresses rather than as a single amount.

  • Some lenders will lend you money to purchase land, typically 75% of the purchase price or value, whichever is lowest.
  • After this, the money for the build is released in a series of stages. These can be fixed or flexible depending on the lender but usually there are five.
  • During the build you can borrow typically 75% of the cost of the value of the house as the project progresses, depending on the chosen lender.
  • There are two methods by which the money can be released during the build – at the end of each stage or at the start of each stage. These are respectively known as arrears stage payments and advance stage payments.
  • In the arrears stage payment method, the money for that stage is released after the stage has been completed and a valuer has visited the site. This can cause some self builders to have cash flow difficulties.