Custom Build Mortgage FAQs
With a custom build mortgage, your funds will be released in stages as your custom build home is built. These stage releases will be paid at key milestones - usually three or four as the build progresses. Stage payments can be released either in advance or in arrears depending on your individual circumstances and requirements. A cost based mortgage is generally best suited to custom build where stage payments are guaranteed based on your project costs. This gives you complete peace of mind and certainty that your home will be completed to a fixed budget.
With a custom build mortgage you will pay a slightly higher rate than you would with a mortgage for house purchase - rates are usually between 4% and 6%. The interest rate is however less significant with this type of mortgage, because it is for a short period, during which you can enjoy interest only payments. Furthermore, you will only pay interest on the funds you've drawn down at any given point during the build. As soon as your new home is complete, you can switch to one of your lender's traditional mortgage rates.
You can borrow up to 95% of the cost of your plot and up to 95% of the cost of your build costs with one of BuildStore's exclusive custom build mortgages. This is around 10-15% more than you will find elsewhere and it means you can get your build underway with as little as a 5% deposit.
With a mortgage for custom build, you should budget around £5000 to cover fees including site insurance and structural warranty, however, this will vary depending on your project. Your mortgage adviser will always discuss what the exact fees will be for your project and issue a KFI (Key Facts Illustration) with details of all of the fees involved. Remember there are savings to be made with custom build including VAT reclaim, and you only pay stamp duty on the cost of your land, not the end value of the property.
When your custom build is complete, you will be able to move onto one of your lender's standard mortgage rates which will reduce your interest rate. If you have been on an interest only basis during your build, you will also move to a repayment mortgage.
The short answer is no. Custom build mortgages are specialist mortgages and your stage payments need to be tailored to suit your individual circumstances and project. BuildStore has by far the widest selection of mortgages for custom build and will ensure that you have the right funds, throughout your project. All of our lenders are building societies, who true to their roots are keen to help you design and build your own home.
You should allow around 6 weeks for approval of your custom build mortgage. This may be vary depending on circumstances so it could be quicker or it may be a little longer. Our in-house team of skilled underwriters will guide and support you through the mortgage approval process, talking you through each step and clarifying anything you may be unsure of. We'll collate and thoroughly assess your application before we send it off to the mortgage lender, pre-empting any questions we think they may have, to ensure you receive a speedy mortgage offer.
BuildStore has around 17 lenders that offer mortgages for custom build. Our expert mortgage advisers will look at your individual circumstances and your custom build project, and find the right mortgage for you.
The difference between a self build mortgage and a custom build mortgage is that with a self build you are building a house and your funds are released to you at each stage of your build. With a custom build a developer is involved in the process and you are paying for your bespoke home to be built for you, in three or four stages. These stages will generally be determined by the developer and are different for each development. BuildStore will tailor your mortgage to suit your custom build home and ensure that you have the necessary funds to pay the developer as required.
The interest rates for self and custom build are similar. You should generally expect to be paying somewhere between 4-6%. The important thing to remember though is that during your build you will only pay interest on your funds as they are drawn down rather than the full amount. Also, you can enjoy interest only payments during your build to keep costs low and remain in your current home as your new one is built.