A self-build mortgage: the first step to building your own home

Having your new house built from scratch is a daunting prospect whether you're building it yourself or having professionals do it for you. It's also a situation that means you require a certain type of mortgage, a self-build mortgage.

Unless you have enough cash sitting in your bank to fund the project through to completion, you’ll need a self-build mortgage to fund the purchase of the land and the build.

The main difference with a self-build mortgage is that the funds are released in stages rather than all of the money being handed over at the time of the purchase. At agreed stages of the project a valuer will visit the site and agree when to release the next proportion of the funds. Rates on self-build mortgages can be higher than rates on standard mortgages, but remember too that you won’t pay stamp duty on your completed home so might be able to save money in other ways.

Self-build mortgage applications usually require more paperwork than a standard mortgage application, and some lenders could ask for a deposit as high as 50%, although 25% is more typical. Any mortgage company will want to see detailed plans for the finished property, and there are also costs associated with having repeated valuations done on the site to check for progress.

Many of the mainstream lenders offer special mortgages for self-builders alongside the more specialist lenders, so it might be worth using the services of a mortgage broker who can help you find the best product for you, given your individual circumstances.