Self Build Mortgage FAQs
Not necessarily. With Accelerator you can start your build with a relatively small deposit and borrow up to 95% of your land costs and up to 95% of your build costs.
If you do have savings however or access to other cash then you may prefer to use an arrears stage payment mortgage. Whatever your circumstances our advisers will find the most suitable product for your needs.
This will depend on how you wish to finance your build and how much cash you have in savings. if you choose an arrears stage payment mortgage then you will need sufficient money for a deposit of between 15 and 25% of the land cost as well as money to pay for the materials and labour for the early stages of the build. if you do not have sufficient savings then you may decide to sell your current house to release equity before starting your new project.
If you don't want to sell your existing house and move into temporary accommodation before your new build is complete then Accelerator may be right for you. Receiving your stage payments in advance during the project will ensure that cashflow is not an issue during the build so you can continue living in your current house until you are ready to move. No costly furniture storage, no caravan on site - Accelerator is convenient and flexible.
Absolutely not. At BuildStore we have a range of products for every need and an extensive panel of exclusive lenders. We've made it our mission to solve the problems traditionally associated with mortgages for homebuilding projects. Our mortgages can be cost based or valuation based and payments can be in arrears or advance. You're building a bespoke home and just as no two projects are the same, there's no one-size-fits-all funding solution. The right mortgage for you will depend on your individual circumstances, build and payment schedule. At BuildStore, our expert mortgage advisers will recommend and tailor your mortgage to suit your payment terms and project costs.
Yes, BuildStore can provide up to 95% on land purchase, with just outline planning permission. This makes buying at auction a possibility and speeds up the process of acquiring a plot, while also reducing the deposit required,
BuildStore has created a unique Mortgage Indemnity insurance for lenders giving them the additional protection they require to release more money to you during the build than their standard lending policy would allow.
With BuildStore, you can have guaranteed stage releases based on your project costs and payment schedule. Our cost based products work particularly well for off-site manufactured construction method such as timber frame where you need to pay for the structure in full before it leaves the factory.
Yes, while most lenders wont allow interest only during your project, BuildStore is able to offer repayment, interest only, or a combination of both.
Yes, you will need to have adequate insurance in place before any lender will release funds to you. Our BuildCare Site Insurance and Structural Warranty products offer comprehensive and competitive cover for your project.
Our vast knowledge and expertise not only of homebuilding finance, but construction means we can guide you through the different funding options available for your individual circumstances and project requirements, and match you with the right one. Through BuildStore Development Finance you can access competitive property development finance and bridging loans. Our expert short term funding team will provide you with the best and most competitive solution for your project.
As soon as possible. There’s no point in designing your dream house without knowing what you can afford to build. If you meet with an architect before establishing your budget, they will design your ‘dream home’, and you may later realise that you can’t afford to build it and need to start making tweaks, and compromising on the specification and key features.
It’s important to fully understand your budget and borrowing options early on because by choosing certain design elements before discussing your finance, you may unwittingly be limiting your choice of lenders and mortgage products.
Interest rates currently range from 3.99% - 5.99%, with most lenders offering interest only during the build – so you only pay interest on the funds drawdown and keep your monthly payments affordable. What’s more, when your new home is complete, you can switch to one of your lender’s traditional mortgage deals, which will have a lower interest rate and bring your payments down.
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 costs, or rely on an uplift in value at each stage.
BuildStore’s unique cost based mortgages provide guaranteed stage payments based on your build costs either before or after each stage of works, depending on your payment schedule. This way you will have certainty in your budget, and peace of mind knowing you’ll have the cash you need, when it’s needed.
A valuation based mortgage releases funds to buy the plot, and then after each stage of works are complete - where a valuation has taken place showing an uplift in value. This can cause problems because there is a risk of the property being devalued during the build.
It depends on your financial circumstances and how much you can afford. As with any mortgage, lenders will assess your income and outgoings to calculate how much they are willing to lend you. However, unlike a traditional mortgage, your borrowing is not limited by the plot or property’s current value. With a standard self build mortgage you can typically borrow up to 75% of your project costs, while with BuildStore’s higher lending percentages you could borrow up to 95%, or 100% if you already own your plot, with a maximum of up to 85% of the expected end value of your new home.
The lowest rate, minimal fees and the total loan amount may be uppermost in your mind for a house purchase, but when it comes to self build, the single most important factor is cashflow, and ensuring sufficient funds are available, at the right time during your build.
At BuildStore, we will thoroughly check your costings and prepare a tailored cashflow for you that forms your payment schedule, so that you know you have the necessary funds available at each stage, and there are no nasty surprises.
With so many factors to consider – construction type, design, ground conditions, etc – it makes sense to consult an expert with in-depth knowledge not only of self build mortgages, but also construction. What’s more, by approaching a specialist mortgage adviser like BuildStore, you’ll have access to a wide range of lenders and products, and they can confidently recommend the mortgage product that is the right fit for your individual circumstances and project requirements.
The construction method you choose for your new home won’t necessarily affect your ability to obtain a self build mortgage, but it can limit your borrowing options.
Self build mortgage lenders are complex in nature, with each lender having its own conditions when it comes to the design, build system and materials used for your new home.
Typically most traditional and modern building systems are acceptable to the majority of lenders. Criteria tends to be more restrictive when it comes to the material used for the outer skin of the build, as this is what protects your home from the elements and is key to its visual appeal.
Your mortgage lender's main concern is that your new home provides them with suitable security and is capable of being re-sold and maintaining or increasing in valuation over the term of the mortgage. So when it comes to the outer skin, lenders tend to insist on standard materials that are durable, have a long life expectancy, and are visually appealing.
With timber cladding, for example, some lenders will not lend on this due to its limited life expectancy of 20 to 30 years, though there are lenders who have no issue with this, and others who will restrict the amount of timber used to a maximum of 25-50% of the overall cladding.
If the construction type you've chosen is very niche, we will find a lender to suit and so nothing should totally eliminate your chances of getting a mortgage, it will just limit the number of lenders and products available to you.
Having said that, it's always best to check that your chosen construction type is mortgageable before you go too far. We can send your plans off to a few lenders quite early on for them to take a view as to whether they will accept it, or not.
Your build costs will depend on a number of different factors, for example the size of your new home, location, design, construction type and internal specification. When calculating your costs, you must consider the fees involved and deduct these from your overall budget.
- Legal fees
- Mortgage fees
- Planning application fees
- Architectural fees
- Surveying fees
- Building regulation fees
- Interim inspection fees
Fees can range from £10,000 to £20,000 in total. A contingency of around 10-20% of your build cost budget is recommended to cover any unexpected costs.
A self build project doesn’t always equal a self build mortgage. There are other borrowing options available which might be more suited to you, and choosing the right one can ensure that the journey to your new home is as smooth as possible.
If you have enough equity in your current home or own it outright, you could remortgage or secure a bridging loan to pay for the plot, fund your build costs or both. Then when your new home is finished, you can sell your old one to pay off the loan. This way you can stay in your current home during the build and avoid the upheaval of moving, living onsite or renting during the build.
We recommend you speak to an expert mortgage adviser who can recommend the right borrowing solution to suit your needs and circumstances.
A retention is where a mortgage lender holds back some of your mortgage funds until your new home is complete.
Self build lenders offering valuation based stage payment mortgages will usually require a retention to be in place. It’s likely that they will hold back between 5% - 10% of your total loan amount until your build is complete. So on the average self build loan amount of £250,000, there will likley be a retention between £12,500 and £25,000.
A retention doesn’t normally apply to cost based stage payment mortgages, and with a valuation based mortgage the funds (except for the plot purchase) are released at the end of each build stage anyway, so the retention is really just following this pattern as your last stage payment.
When it comes down to actually applying for your mortgage, you’ll need to provide the information and documentation requested by your chosen lender.
It’s important that your credit report is in good condition, and the income and outgoings shown on your bank statements are healthy, with no signs of overspending.
The personal and financial information required is typical of that of a traditional mortgage, for example a form of ID, proof of address, bank statements and income documents. In addition to this, the lender will need a copy of the plans for your new home, planning permission and build cost breakdown.
FYI If you’re building a new home, our team of qualified project managers can prepare a full breakdown of your total build costs as part of your mortgage application – saving you time and hassle.
You’re building a bespoke home and just as no two projects are the same, there’s no one-size-fits-all solution. The right mortgage for you will depend on your individual circumstances, build and payment schedule. At BuildStore we can tailor your funding to suit your payment terms and your project costs.
At BuildStore, mortgage rates are between 3.99% and 5.99%. Interest rates are typically higher than those available for house purchase because there is more risk associated for the lender during the build However, with a self build mortgage the interest rate is less important than for house purchase, because interest only payments can be arranged and you only pay interest on the funds you draw down at any one stage - keeping your monthly repayments affordable.
With a loan amount of £250,000 your monthly mortgage payments for an interest only self build mortgage would be less than that of a traditional repayment mortgage.
During the build - 4.5% = £937 per month (interest only during the build)
Build complete - 1.7% = £1023 per month (traditional repayment)
It takes around 8-12 weeks to achieve a mortgage offer but the timescales are really dependent on how quickly you can send us the required forms and documentation to progress your application.
It would be very tight on timescales with a self build mortgage due to the quick turnaround of a property purchase at auction. However, there are other types of finance available which we can look at for you - for example remortgaging or taking out a bridging loan against an existing property you own.
At each stage of your build, it's possible for works completed, not to value up with what was spent. A good example of this is the foundation stage, as the works complete tend to add little, or no value to the plot, which is not good if you're relying on an uplift in value to receive your next stage release of funds from your mortgage to keep the build moving.
A valuation based mortgage can be risky as your stage releases are dependent on the valuer's comments, workmanship and market conditions. A cost based mortgage removes the risk and your stage releases are based on what you are actually spending.
The key benefit is that you'll always have a positive cashflow and know from day one of your build, that you'll have enough funds to progress throughout each stage.
It puts you in a great position for buying materials, especially when it comes to the final stages when you're buying your kitchen and bathrooms, as you'll benefit from great deals as a cash buyer.
Most mortgage lenders will require a retention, and the reason for this is that they want to make sure that you will complete the property. The main risk to a lender during the build is that they have to take ownership of an unfinished property. Only a small amount is held back, typically 5%, and it will be released on receipt of your building control completion certificate.
It's possible but not ideal. Approaching your lender for further funds on top of what's already been agreed can be very time-consuming and expensive. It effectively involves a second mortgage application with the associated forms and documents required by the lender. Being in this position can be very detrimental to your build because if you don't have the funds when needed, it's likely that your project will come to a halt.
It's for this reason, it's important that your build costs are realistic and that you have a sufficient contingency in place. At BuildStore we look at all of these things to make sure you have enough funds to successfully complete your project. If it turns out that you don't need to draw down all of your allocated funds, then you don't have to. But, it's good to know the money is there - just in case.