Self-Build Mortgages

Everyone deserves the chance to purchase their dream home. For some, this may even mean building the property itself! In such instances, a self-build mortgage is necessary. This type of mortgage loan can seem somewhat daunting as they have different lending terms from traditional mortgages. However, self-build mortgages with Proper Finance are made simple.

If you want to create your own perfect home, then we can help. With access to some of the best self-build mortgage lenders in the UK, we can help you find the best mortgage rates today. 

Get in touch to find out more, or fill out one of our online loan enquiry forms. 

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What Is a Self-Build Mortgage & How Does It Work? 

Typical mortgage loans enable homeowners to access funds straightaway to secure a property. Self-build mortgages, however, differ in this aspect. Because self-build mortgages tend to be used by those wishing to build their own homes, they will not have any property to act as collateral (or security) against the loan. As a result, self-build mortgage lenders tend to release the loan in instalments. 

These instalments fund the process of construction. When the loan is released will vary by lender. Some lenders will provide some of it in phases to support the current stage of construction. Others may release in arrears, which means the borrower will need to fund the construction stage and claim the money back later. 

What Types of Self-Build Mortgages Are There? 

There are various types of self-build mortgages available today in the UK. Because of this, potential borrowers should be aware that the self-build mortgage they want to secure is suitable for them. 

There are two types of self-build mortgages: advances and arrears. 

Advance Self-Build Mortgage 

An advance self-build mortgage is suitable if the borrower needs consistent cash flow to fund their build. For instance, an advance self-build mortgage means the lender will release part of the loan in advance, which the borrower can then use to fund the different stages of building. 

Potential homeowners who have deposits saved yet require funding to build their dream home may find advanced self-build mortgages most appropriate.

Arrear Self-Build Mortgage 

An arrear self-build mortgage, in contrast, is not given to the borrower in advance. Therefore, the borrower will be responsible for funding the building project. For instance, they will need to find the funding for labour and material beforehand. Yet, once they have completed the construction stage, the lender will supply them with the money. 

Hence, borrowers will need to have the cash saved before they borrow an arrear self-build mortgage. If money is limited, such borrowers may consider using a bridging loan which could later be repaid with the mortgage loan. 

Are you considering a self-build mortgage loan yet are unsure which type is most suitable for you? Contact Proper Finance today. We can help secure the best mortgage solutions for you. 

Can I Get a Self-Build Mortgage?

Self-build mortgages are fit for custom builds, renovations and conversion projects. Similarly to other residential mortgages, a self-build mortgage will come with its own strict eligibility and affordability criteria. 

Lenders will first need to check if you can afford to borrow the self-build mortgage loan. For example, they will calculate how much the property or land costs based on the area it is in, your (or combined) annual salary, and if you will be living in another home or rental while completing the project. These factors, and others, will determine if you can afford to fund the project. 

Generally, lenders will need applicants to provide: 

• Proof of identity 
• Age (some self-build mortgages are for 25+ only) 
• Address 
• Bank statements 
• Payslips 
• Proof of deposit 
• Any ongoing debt 
• Rental or mortgage arrangement(s) 

Furthermore, lenders must be made aware of the type of building constructed. Not only does a potential lender need to assess the current financial situation, but they will also likely require them to give proof of the following: 

• Land and building purchasing fees 
• Planning permission 
• Other pre-construction costs (design fees and demolition/site preparation) 
• Construction costs 
• Health and safety compliance 
• Who is building the property & what work will completed 

Some lenders may also not work with certain types of builds. Nevertheless, all constructions will need to be built under Building Regulations. 

What Are the Stages of a Self-Build?

The majority of lenders release self-build mortgages as the following stages occur: 

1. Land purchase 
2. Foundation laying 
3. Wall construction 
4. Watertight roof and window fittings 
5. First fix (plastering, wires, and pipes fit) 
6. Final completions 

However, not all lenders will operate strictly on the above. Some lenders may release the mortgage as the property value increases. 

How Much Can I Borrow with a Self-Build Mortgage? 

Self-build mortgages are, all in all, more complex than traditional ones. How much you can borrow with a self-build mortgage will depend on your current personal and financial situation alongside the lender we match you to. 

Generally, the LTV (Loan-to-Value) for self-build mortgages tends to be around 80%. Hence, a deposit of at least 20% will be required. Nevertheless, Proper Finance may be able to find lenders who can provide higher LTVs.

You can use an online mortgage calculator to discover how much a self-build mortgage could cost. Alternatively, get in touch – we would be happy to help! 

Can a First-Time Buyer Get a Self-Build Mortgage? 

Yes, a first-time buyer may still be eligible for a self-build mortgage. However, first-time buyers may be need a larger deposit to secure the loan because they have no previous home ownership.

How to Get a Self-Build Mortgage with Proper Finance

Having no prior knowledge of self-build mortgages can leave applicants feeling overwhelmed. Understanding the rules and costs can also be time for many. Luckily, Proper Finance can help! 

We aim to do things properly when finding mortgages in the UK. But how do we do that? We have built up a network of trusted and leading lenders across the UK whom we can help match you to if you are seeking a self-build mortgage. By using us, you will skip the queues in town, avoid the many hours spent looking at comparison sites and can instead submit your application to us quickly and easily. 

We are FCA (Financial Conduct Authority) authorised, so potential borrowers can rest assured that they are in the best hands. What’s more, our site is completely free to use. So, all you need to do to start your journey to a self-build mortgage through us is to complete our online loan enquiry form. 

We will not keep you waiting – all you need to do is:

• Be at least 18 years old (some lenders may have different age limits) 
• Earn over £15,000 per year 
• Have a good credit history 

Once the form is complete, we will shortly be in contact for a quick call! Afterwards, our team will find the best self-build mortgage lender for you. If you are happy with the lender, we will prepare your documents and the payments on your behalf. 

It is as simple as that with Proper Finance.

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