Self build mortgages

Self build mortgages are designed for those wishing to build their own property but who do not have funds for the full development up front. They are typically agreed for the funds to be released in stages throughout the completion of the building work.

Various key points in the completion of the construction will be agreed for funds to be released on and inspections will be made to ensure that the work has been completed to allow release of the next stages funds. For this reason it is important that anyone undertaking a self build project should have made adequate costings for all stages of the construction project and crucially allowed a margin for error as unexpected costs almost always arise.

Self build mortgage lenders will usually require a significant deposit as the risk to the lender that a project is not completed is quite significant.

Lenders operating in self build mortgages may want work to be carried out by a qualified professional in the industry and for typical construction quality guarantees to be in place so if you are planning to build the property yourself without relevant experience and skills it may be difficult to arrange finance.

Self build mortgages can however provide significant savings over buying a home from the open market in most cases and can provide a very cost effective way of buying a home for those with the tenacity and experience to do so.

The pros and cons of variable rate deals

Pros:

  • very affordable housing opportunities
  • removes the need to have cash up front for all development costs
  • staged release of funds helps to control costs and process

Cons:

  • risk of not completing project
  • risk of shortfall to complete a construction stage
  • specialist knowledge or experience may be required

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