What you need to know about self build mortgages if you're planning on constructing your own property.
The main difference between a self build mortgage and a house purchase mortgage is that with a self build mortgage money is released in stages as the build progresses rather than as a single amount.Some lenders will lend you money to purchase land, typically 75% of the purchase price or value, whichever is lowest.
After this, the money for the build is released in a series of stages. These can be fixed or flexible depending on the lender but usually there are five.
During the build you can borrow typically 75% of the cost of the value of the house as the project progresses, depending on the chosen lender.
There are two methods by which the money can be released during the build - at the end of each stage or at the start of each stage. These are known as arrears stage payments and advance stage payments respectively.
In the arrears stage payment method, the money for that stage is released after the stage has been completed and a valuer has visited the site. This can cause some self builders to have cash flow difficulties.
The advance stage payment method is where the money required for that stage is released at the start of the stage before work starts.
This advance payment mortgage has become very popular as it gives positive cash flow during the build and makes it is easier to stay in your current house while the build progresses.
The stages of a build depend on whether or not you are building a traditional (brick and block house), a timber frame construction or if you are renovating or converting an existing property.
NB This information is provided to give you an overview of the different types of mortgages available. It is not comprehensive and you should not base your mortgage decision on the information found here. We recommend you seek professional advice in order to determine the most suitable mortgage for you.
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