Self-Build Mortgages; How we can help
The majority of the high street lending market does not offer self-build mortgages, with the market mainly being catered for by small building societies.
Many of them also only offer these products through an experienced broker like ourselves due to the specialist nature and additional requirements.
We can help you find those lenders suitable for your requirements and prepare the application on your behalf.
We make sure that you meet the lender's criteria before application and avoid time-consuming, costly and stressful investigations into lenders whose criteria you don’t fit.
Benefit's of our self-build mortgage advice service;
- Our advice fees are only chargeable at mortgage offer stage
- We offer whole of market advice
- We can access a wide range of products
- We have access to self-build lenders who can offer stage payments in advance or arrears from land purchase to completion of construction
- Some lenders can offer initial advances not based on the present value
- Products available without redemption (or early repayment) penalties
- Lenders are available with minimum deposits of 15%
- Maximum advances are available up to £1 million for self-build and renovations
Self-Build Mortgages; The basics explained
In a self-build mortgage, the lender advances funds in stages as the work is completed allowing you to move onto the next stage of the build process up to the completion of construction.
Some lenders may be able to advance money to assist in land purchase and others may only advance any funds once a certain stage of work has been completed.
Funding will likely be based on your income and affordability like a normal mortgage.
The lender will usually assess the work at each stage of the build including checking relevant approvals and sign off including planning approval, structural engineer's certification if applicable & building regulations compliance.
Once work is completed you can usually stay on the mortgage long term like any normal mortgage deal or remortgage to a new deal from the high street although early repayment penalties might apply to some products for a few years.
You will normally need slightly larger deposits for self-build loans, lending against income might be a little lower than a normal mortgage though.
Some features could be available which would be unusual on a normal residential loan such as having interest-only payments until the completion of works.
Self-Build Mortgages; The detail
Some self-build mortgages are only for building an entirely new property however many of the products available now are suitable for property renovation and work in much the same way.
It’s also typical for many lenders offering self build loans to require that you begin the application process before starting any construction work.
So it’s not ideal to only begin researching a mortgage once a project has started, although if you have found yourself in this position we may still be able to help you, however, it’s likely fewer options are available.
Most lenders can advance funds in various stages, at each point checking the completed works and advancing more money to complete the next stage.
This will usually involve a surveyor coming out to inspect the site and seeing sign off from architects, engineers or building control officers as applicable.
It’s therefore vital not only that the work meets applicable standards and appropriate approvals are provided, but also that you do not overspend and find yourself in a position where you cannot complete a stage of works. Planning to have some contingency for cost overruns is imperative.
Many advance funds at the end of each stage of the works but some can advance funds before beginning each stage.
This will be crucial for some applicants, for example, if you only have funds to buy the land, you will need funding in advance to complete the foundations.
The stages at which a lender can advance funds are also important.
Some lenders can advance funds through each stage of the build from as early on as buying the plot of land (or even being gifted/inheriting it) and will continue to advance funds through the various stages.
These include stages such as the foundations being laid, walls erected up to second storey level, wind & watertight, first fix, second fix and completion (but various lenders will differ on exact points).
Other lenders particularly some of the high street lenders may only advance funds much further into the completion of the project and hence you will need considerably more cash aside at the outset to use these lenders.
Most of the lenders offering these products will also be small building societies and hence the lending rules will generally be more restrictive than a normal mortgage, so advice will make finding a suitable deal considerably easier.
You will probably find a considerable number of the products offered are also discount or variable rates particularly for those with more flexible or generous options around the stages and advancing funds upfront.
Self Build Mortgages; The typical payment stages
- Land purchase if acceptable with the lender
- Foundations completed
- Wall plate level erected or timber frame erected
- Wind & watertight
- First fix of electrical and plumbing works, plastering completed
- Second fix and completion