how self build mortgages work

Self build mortgages release funds in stages – in arrears or in advance. Depending on your individual circumstances, your stage payments will either be guaranteed based on your project costs, or rely on an uplift in value at each stage.

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Self Build

How Self Build Mortgages Work

The main difference between a self build mortgage and a traditional mortgage for house purchase is that with a self build mortgage, money is released in stages - in arrears or advance - as the build progresses, rather than as a single amount.

There are different mortgage types available depending on your project requirements and individual circumstances. Your mortgage adviser will recommend the right product for you.

Every self build project has identifiable stages from the initial digging of the foundations to the final fix. The following chart shows the typical stages for a traditional brick and block construction and a timber frame construction.

red bricks stacked ready to be used in the construction of a new self build house 83761462

Brick & Block

  • Stage 1 Purchase of land
  • Stage 2 Preliminary costs & foundations
  • Stage 3 Wall plate level
  • Stage 4 Wind & Watertight
  • Stage 5 First fix & plastering
  • Stage 6 Second fix to completion
timber frame of a new home under construction 406650811

Timber Frame

  • Stage 1 Purchase of land
  • Stage 2 Preliminary costs & foundations
  • Stage 3 Timber frame kit erected
  • Stage 4 Wind & Watertight
  • Stage 5 First fix & plastering
  • Stage 6 Second fix to completion

Depending on your individual circumstances, your stage payments will either be guaranteed based on your project costs or valuation based requiring a sufficient uplift in value at each stage of your project. The latter can cause problems when the lender instructs an interim valuation, and the valuer comes back with a figure that is lower than expected. In these circumstances, the lender may only release the lower figure provided by the valuer. It's for this reason that BuildStore usually recommends a cost based mortgage, providing peace of mind and guaranteed stage payments. Nobody wants to run into cashflow problems during their build.

self builders going through mortgage documents 1364154659

Advance Stage Payments

  • Funds are released at the start of each build stage, prior to work commencing. Your stage payments are always guaranteed, and are based on your project costs, irrespective of any valuations carried out by the lender, along the way.
  • Great option if you don't want to sell your existing property to release equity, or you don't have vast savings. It means that you will have cash to pay your bills on time and purchase the materials you need at better prices. You are therefore in a cash positive position during the build, and much more in control.
  • Ideal if you are planning to use an off-site manufactured construction method such as timber frame where you may need to pay for the structure in full before it leaves the factory. You’ll want access to those funds, guaranteed and upfront.
  • You'll only need a 5% deposit to get your project underway.

Arrears Stage Payments

  • Payments are released after each stage of the build is complete because the lender wants to make sure that they do not lend more than your project is currently worth, at any given time. Money is released once a valuer has provided the lender with the current valuation.
  • Suitable if you have savings or access to cash to fund the build stages. Stage payments are not guaranteed and will be subject to interim valuations by the lender. BuildStore has a range of exclusive cost based arrears stage payment mortgages ensuring stage payments are guaranteed, regardless of valuation figures.

Features

Advance Stage Payments Arrears Stage Payments
Borrow up to 95% of the cost of your plot Borrow up to 85% of the cost of your plot
Borrow up to 95% of the cost of your build Borrow up to 85% of the cost of your build
Receive your money in guaranteed advance stage payments at the beginning of each build stage Receive your money in agreed stage payment subject to valuation, unless using a BuildStore arrears cost based product
Stay in your current home as you build Stay in your current home as you build
Stage payments are not determined by interim valuations Choice of leading lenders, products and competitive rates
Receive the money to pay for your timber frame when required
Choice of leading lenders, products and competitive rates

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