What is a self build mortgage?
Self build mortgages are used to get your finances organised for a self build project. Getting a mortgage in place is essential to the success of the build. These deals usually stipulate that the mortgage cannot exceed the total cost of the self build (the land and the build expenses) and can be up to 75% of the final valuation.
How do self build mortgages work?
Traditional self build mortgages work by releasing money after various stages of the build once an inspection has taken place. This means you’ll get an initial release of money to buy the plot and then further releases at set points in the project as the build progresses. This is called an arrears mortgage as the money is released after the completion of the stages. This type of mortgage is usually used by self builders who have a deposit for the land and enough saved to fund early building stages. They may have raised these funds through remortgaging a plot of land they already own or by selling their property.
Is an arrears mortgage the only option?
No – Some lenders offer self build mortgages in which funds are released before each stage rather than after, giving you the funds to complete each part of the project. This allows you to use the money for expenses such as materials and builder costs. It’s ideal if you only have small amounts of cash available or don’t want to sell your existing house yet.
Pros and cons of self build mortgages
Self build mortgages are a great option if you’re looking to build your dream home or undertake major renovation work. Your final property could even be worth a lot more than it cost to build. You’ll also save money on things such as stamp duty. However, rates can often be higher than standard mortgages, so do your research and get advice before embarking on your self build journey.
When looking to apply for any type of mortgage, getting professional, impartial advice can help you get the best mortgage product for you. Find a trusted mortgage adviser in your local area here.