Self build mortgages: What to know in 2020

The latest advice for self build mortgages in 2020 could help you to secure the finances to build your dream home.

By Karen Stylianides | 25 August 2020

Get the latest self build mortgage advice to ensure you secure funding for your project.

self build home with black cladding Photo: Mark Bolton - grand designs

Image: Steph and Alex Wilson funded their barn-style build with profits from a land sale and a small self build mortgage Photo: Mark Bolton

Unless you are in the fortunate position of having enough money in the bank to cover the entire cost of your project, it is likely you’ll be looking to secure a self build mortgage. For the majority of self builders, it’s best to look for a specialist product tailored to suit the needs of building a home.

Set a budget for your self build

Start by establishing a budget, which ideally you must stick to. As a rough guide, assess the amount of cash and equity, subject to lending criteria, you already have along with the total you can afford to borrow via a self build mortgage, and then calculate the size and type of house you can build with the funds available. Or if you know the size of the property, work out in reverse how much it will be to buy a suitable plot and build the home of your dreams on it. Factor in the cost of where you live for the duration of the project. Can you stay on the site in a caravan, which you may have to buy, or will you need to rent somewhere to live?

When applying for a self build mortgage

A prospective lender will want to see evidence of the granted planning permission, detailed architectural drawings and specifications, as well as the total project costs. You need to be clear on all possible figures, such as fees for professional help, including valuations, as well as the build type, construction method and materials. Seek help from an experienced and qualified project manager to determine and prepare the total project costs and schedule of works with cash flow.

Read more: 6 things architects want you to know about your self-build or renovation

How do self build mortgages work?

Most lenders restrict the loan amount to up to 75 per cent of the final valuation. Finance is released at set stages during the build to ensure that you have the funds available for each phase of the project.