Self build mortgages

UK Self Build Mortgage

More and more people are self building. It can be up to 30% cheaper than a existing house of the same type and an estimated 20,000 people will be self building by 2007. It is becoming more popular because it gives home owners far greater control over where they live and in the type of house they live in.

The type of financing for a self build is slightly different than for a standard mortgage. The main difference is that you are buying a property that is not available for inhabiting until it’s finished and yet you still have to have a home. Not everyone can live in a caravan on the site of the new build and so would need the sort of finance that would allow them to live in their current home and still be able to finance the building stages of their new home.

Many self build companies offer help on deciding on a mortgage provider to suit your needs.

A self build mortgage releases finance in stages as the build progresses, usually in five stages, rather than in a one off amount. The money can either be released at the start of each stage or at the beginning. If you are receiving your payments after the build stage you may suffer from a cash flow problem and so the advance stage payment would be more beneficial. You may find a lender that will also allow you to borrow money to purchase the land, stamp duty will also be due on the cost of the land not, however, on the property itself. A typical amount borrowed from your lender would be around 75% of the value of the house.

It is advisable to have a contingency fund for any increase in costs of around 10 – 15% of the total build cost.

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