Funding your new home

When considering designing and building your own home, the first thing you may think about is how will I fund it? There are many ways to fund a self build. If you’re looking at mortgage options, then some of the following may be of help.

Self-build mortgages

Self-build mortgages differ from traditional mortgages, in that you are borrowing for a property that is not yet built with a schedule of costs that indicate a final valuation. With a traditional mortgage, you receive the full mortgage value in one payment, whereas with a self-build mortgage, the lender pays out in stages as each stage of build completes.

There are specific lenders that are happy to lend for self-build homes and the best way to find the right self-build mortgage for you is to work with an Independent Financial Advisor who is experienced in self-build. They have specific expertise in working with self-build lenders and with access to good self-build mortgage rates, they can help you to secure the right mortgage for your needs.

While each lender will have different criteria for lending, all will require you to have a sizeable deposit, usually between 20% and 25% of the total value of the self-build including land purchase if applicable. (land should have outline planning or permitted development rights).

Understanding costs

Before you can apply for a self-build mortgage, you’ll need a detailed understanding of all costs relating to your project. This is where our members can really be of benefit. Each of our self-build members has years of experience in building all types and sizes of home and can expertly guide you through the various cost options and help you to set a budget.

All lenders will require a detailed cost schedule for your project that includes the build costs along with architect, other consultants’ fees, and a healthy contingency of between 15% and 20%, depending on overall costs.

Help to Build

The Help to Buy scheme is a Government initiative, developed to help those who want to self-build. The aim is to make it more affordable by providing a Government backed equity loan of between 5% and 20% of the total cost of the project.

The real benefit is that the loan is used to purchase the land if you don’t already own the plot. The maximum amount of the loan is £600,000 with up to £400,000 of this to be used for build costs.

No interest is charged on the equity loan for the first 5 years, and you will start to pay interest from year 6. Before you can apply for a Help to Buy equity loan, you must have your mortgage agreed in principle with a lender, registered with Help to Build.

The Help to Buy scheme is open to all adults over the age of 18 who are building the self-build home as their sole home. You must have a minimum of 5% deposit of the total costs including land.

Visit the National Self Build & Renovation Centre

Designed to help self-builders, the centre is a wealth of information and guidance with events and courses to increase your knowledge and help you on your journey to your new home.

The centre is open from Tuesday to Saturday from 10.00 to 5.30pm and to 4.30pm on Sundays.

NSBRC – Lydiard Fields, Great Western Way, Swindon SN5 8UB
Tel: 0345 2234455

Mortgage Specialists

If you’d like more information about self build mortgage options, the following specialists can help.

Tom McSherry

[email protected]

Mayflower Mortgages
Mike Pawley

[email protected]