Self-Build Mortgages
About 20,000 people build their own homes in the UK each year and this number is rising. There are also many people undertaking a major renovation or conversion. If you're planning on buying some land and building your own home or undertaking a major renovation, a self-build mortgage might be the best choice for you. The main difference between a house purchase mortgage and a self build mortgage is with a self build, the money is released in stages rather than as one big lump sum.
The lender typically releases the money to you in stages after building has begun until the loan is fully drawn, as shown in the example below.
| Stage | Timber Frame | Traditional Brick and Block |
|---|---|---|
| 1 | Purchase of Land | Purchase of Land |
| 2 | Preliminary costs and foundations | Preliminary costs and foundations |
| 3 | Timber frame kit erected | Wall plate level |
| 4 | Wind and watertight | Wind and watertight |
| 5 | First fix and plastering | First fix and plastering |
| 6 | Second fix to completion | Second fix to completion |
You should bear in mind however, that not all lenders will release the money at the start of each stage. Some will only make payments in arrears, which will mean that you will have to find large amounts of money to pay for the land and materials in advance of getting funds from the lender. This results in many self-builders having to sell their existing homes and either move into rented accommodation, a caravan, or stay with relatives during their build. There is also often a charge made for inspections at the end of each stage.
There are many banks and building societies offering mortgages to self-builders and renovators. You may be able to get between 25% and 80% of the value of the building plot and between 65% and 95% of the costs of the building.
