Self-Build Mortgages

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David Stirling shares his expertise on Self-build mortgages.

Is it hard to get a Self-build mortgage?

Essentially it will be more difficult to get a Self-build mortgage because it poses a higher risk to the lender, in that the build may not necessarily be completed, and there’s also fewer lenders. It can be a lot more challenging than simply buying a house, but potentially more rewarding.

Is it cheaper to build your own house or buy a house?

Self-build mortgages typically have higher rates of interest than traditional mortgages. In the end, however, they can work out substantially cheaper than buying a new home as Stamp Duty on land is cheaper than buying a new house. You need to think of the current costs of material, but usually the final value of the house that you build should be significantly more than what you’ve paid for it.

Do you need planning permission for a Self-build mortgage?

Usually the lender will definitely want to see architect plans that have been approved by the local authority before they’ll even consider lending, so you would need architect or builder led plans and those need to be approved.

Do many lenders offer Self-build mortgages?

The market is quite limited but in Northern Ireland, all our local banks tend to lend on Self-build, so it is quite popular, probably because we have lots of countryside and families gifting land.

 

There are some of the bigger banks that will also lend, but not every high street lender is going to offer Self-build mortgages.

How does the application process differ for a Self-build mortgage?

The application’s going to be pretty much the same, the only extra things really are the plans from the architect and the costs from the builder, including a contingency fund to ensure the borrowing will cover the full build and any potential additional costs that may be incurred.

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How do you fund your Self-build house?

How you fund it changes from lender to lender, which is why it’s good to use a broker. Some lenders will lend on the land, but you need a 25% deposit for the land. Others will insist that you buy the land yourself and then they will lend stage payments after that. 

Can you get a mortgage on a half-built house?

This would be more tricky because typically the bank won’t have seen the builder or architect involved, and they prefer to be involved from start to finish on this type of project.

 

The new lender, Ecology building society, speciales in ‘fixer-upper’ type mortgages, but this is quite unique, and they would be the only one that would maybe entertain a half built house. 

What credit score do you need to buy land?

If you’re buying land you don’t need any credit score because you’re not borrowing any money. It’s when you come to apply for finance or a mortgage that credit score would be more important, so you don’t really need any credit score to buy land.

How are Self-build mortgages calculated?

Typically the Self-build mortgage is calculated by the estimate from the builder, so you’ll get a list of materials, the size of the property and what the external landscaping is going to look like factored into the total cost to build the property. What the final property value will be is not factored in.

Can you get a mortgage to renovate?

It’s possible, but it’s going to be down to the lender’s criteria. Bridging Finance may be an option if it’s just short term to build. To renovate a property a standard Remortgage should be possible.

How can Mortgage Brokers like Mint Mortgage and Protection help with the application process?

 

We have contacts within all the local banks, and know of quite a big self-build lender that offers Interest-only mortgages, which keeps your cost down for the first couple of years. We work with a number of lenders that can offer you this type of loan, and can introduce you to them.

 

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. 

 

We may charge a fee of up to £395 for mortgage advisory services and administration

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Expert Mortgage Advisers

We work with dozens of lenders

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We will work with you to understand your situation and needs, then develop personalised advice to help you achieve your goals.

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