Self-build mortgages

Self-build mortgages are designed to help people construct their own homes. They differ from traditional mortgages in several key ways, including having different eligibility criteria and products available. With self-build mortgages, it’s important to consider what is involved and how they work. Below, we will highlight the key stages involved and what borrowers can expect. The 7 key stages are; 

• Land Purchase
• Foundations
• Wall plate
• Wind and watertight
• First fix
• Second fix
• Certified completion

Funds are released at each stage as the build of the property progresses with the amount released at each stage differing as they can require different amounts of money. The actual amount for each stage depends on the project itself and will differ for each property. When applying for a self-build mortgage, borrowers will have to provide detailed plans and costings to show they have a realistic budget and that the project is actually feasible.

Interest rates on self-build mortgages are typically higher than on regular residential mortgages which is due to the increased risk to mortgage lenders. Peritus are a fully independent broker, who search the whole of the market in order to secure you the best possible deal.

Case Study

A client came to Peritus as a first-time self-builder, their income was good so there were no concerns in terms of affordability, however, they were on a strict budget with limited cash available for both the plot purchase and the build itself. It was therefore imperative that a lender be sought that could work to a higher loan to value to fit within the budget. One of our specialist advisers Matt, was thankfully able to quickly source a product that met the client’s needs and budget, resulting in a client successfully being able to complete their build.

Case Study

Whilst there are many aspects of self-build mortgages that are different to that of a traditional purchase mortgage, ultimately with a self-build mortgage the amount that can be borrowed is determined by a client’s income and expenditure. A client (husband and wife) came to Peritus wanting finance to purchase the land and build a new home. The clients had located a plot of land to build the home, but the husband’s income was made up of salary, overtime and bonuses and the wife had a business with only one year’s accounts. Lenders generally will look at overtime and bonuses in very different ways, they will also typically require someone who is self-employed to have two years' sets of accounts. The Peritus adviser managed to source a lender that could take the bonus and overtime more favourably than others and use the self-employed income with one year’s set of accounts. As a result, the clients were able to obtain the mortgage amount required and able to complete their build.