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.
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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
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.
What’s the difference between custom build and self build?
Help to Build is for both custom build and self build new homes.
- Custom build – a professional homebuilder manages the entire process with you. Custom build homes are usually part of a wider development but built with design flexibility so you can be involved with key design decisions and your new home will be built to your specification.
- Self build – you organise each stage of the project yourself e.g. buying the land, and engaging design professionals and contractors.
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!
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