How does a self build mortgage work?

What is a self build mortgage?

A self build mortgage is different to a traditional mortgage in that the funds are released in stages as the build progresses. This is ultimately to reduce the risk to the lender.

Featured image above by Allister, architect from Oxfordshire. See more and shortlist them for your home project here.

What’s the difference between an arrears and advance self build mortgage?

With an arrears self build mortgage, the lender released funds after a stage has been completed. With an advance self build mortgage the payment will be released before each stage.

The advantages of the advance self build mortgage is obvious – there is less risk for you and also you can use the instalment to buy materials and labour for the upcoming stage. With an arrears mortgage, you will have to pay for the stage yourself and then be reimbursed afterwards.

However the interest rates on an advance mortgage are usually higher.

What stages are payments released in a self build mortgage?

These stages below typically represent the main construction milestones in the project. These stages will vary from lender to lender.

• Purchase of land (although only a few lenders will provide funds for the purchase of the land)
• Completion foundations and footings
• Completion of walls prior to roof
• Completion of the shell to provide a water-tight building
• Completion

How much deposit do you need for a self build mortgage?

Typically you would need to have least 25% of the total cost (including land and construction costs). However, the Government’s new Help to Build Loan (from Winter 2021) has meant that it’s possible to access Self Build loans with as little of 5%.

This equity loan scheme is provided by the government to top up a standard self-build mortgage and you can read more on this here.

Finding the best architect for your self build…

Design for Me is a free platform to help you quickly find the right design professional for your home project. My name is Emily Barnes and as a residential architect myself, I started Design for Me after finding that talented and innovative smaller firms and individuals, who are perfectly placed to design new homes, extensions and renovations, can often get buried under the online profiles of large commercial companies.

Before Design for Me, the right architect was very difficult to find!

Once you register your project, we’ll match it with 100s of top architects or interior designers in your area and beyond, and you can see who may be available and eager to work on your project straight away.

• quickly see who’s interested in your job
• create a shortlist
• invite up to three for a no-obligation consultation

Find your self build architect

Find your perfect design pro within minutes…

Here at Design for Me we match you with the right design professional, from thousands all over the UK. Get quotes & arrange up to three no obligation consultations. And it’s all completely free! Find out more here or get started below…

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