Self Build Mortgage
Self-build mortgages are used to finance the construction of new property, renovations, extensions and conversions. Taking the challenge of building your own home can be costly and may require a mortgage to finance the project. You can obtain a self-build mortgage to cover the cost of the final property value or to cover the total cost of the project. The difference between a regular mortgage and a self-build mortgage is that with a self-build mortgage the capital is issued in stages. These payments usually come in five stages - to pay for the land, to finance construction of foundations, another during the main construction phase (wall plating or timber erection), another during waterproof sealing and a final sum for the finishing of the construction. Some lenders may also suggest that you borrow an additional sum on top of the estimated project cost as a contingency. This is to avoid re-negotiating the mortgage after the self-build project has started.
Finance for the purchase of land usually becomes available after outline planning permission has been arranged. The main construction of the building is usually funded only when full planning permission is granted.
Many self build mortgages do not offer these stage payments until after the phase they cover is complete. These are known as arrears payments. This means you may need to obtain a bridging loan to cover initial costs until you get the mortgage capital. However there are self-build mortgages on the market that offer stage payments in advance. These are known as advance stage payments. With these mortgages you will not require a bridging loan.
It may be worth looking into negotiating a mortgage before you find the land as it can be more time consuming arranging a self build mortgage compared with a regular mortgage.