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Am I Eligible for a Self Build Mortgage?

By: Emma Eilbeck BA (hons) - Updated: 27 May 2013 | comments*Discuss
Self-build Mortgage Lender Borrow Costs

Applying for a self-build mortgage is just like applying for a normal mortgage.

You can seek advice or choose to go direct to a mortgage lender, unlike a normal mortgage though you will have to make sure you have the plans for the property in order. If you don’t have the correct paperwork it is not only your mortgage hopes that will be dashed but also your dream of building your own home.

These few questions should give you an indication as to whether you are eligible for a self-build mortgage.

1) How Much Do You Want to Borrow?

  • A) We want to release the money in two stage, we have a 20% deposit
  • B) We have a 10% deposit
  • C) We have no deposit

2) How Advanced Are Your Plans?

  • A) We have all of our property plans ready, we have been working with anarchitect and calculated the projected building costs
  • B) We have almost finished our plans but have not yet accounted for all of our costs
  • C) We have not yet drawn up our plans , we only have a rough idea of prices

3) Who is Applying For the Mortgage?

  • A) Both me and my partner
  • B) Just me, but with some help from my parents
  • C) Just me

4) Do You Have Planning Permission?

  • A) Yes we have full planning permission
  • B) We only have partial planning permission
  • C) We do not have any planning permission

5) Your Financial situation

  • A) We both have full-time jobs and a good income
  • B) I am self-employed but my partner had a full-time job
  • C) I only have one income and I am self-employed

Your Answers

Mostly A – You Stand A Good Chance

If you have all of your plans in place and a hefty lump sum already saved, it’s likely a lender will say yes to your self-build application.

It is no harder to get a mortgage on a self-build property than it is for any other mortgage, but there will be more paperwork involved.

You will need to have full planning permission and completed plans in place. You will also need to show them that you have calculated for all of the costs involved in your self-build. You will not be able to go back to the lender and ask for a top up half way through your project, so it is best to go over budget.

If there are two of you and you are both employed full-time this will work in your favour as a lender will take into account both of your incomes and you will be able to lend more.

Mostly B –Making Good Tracks

You sound like you are making good progress in terms of your self-build application, but you may need to put in some more groundwork.

Before making any application you will need to have submitted your plans to your local planning authority and have these approved. You will also need to decide how you want the money distributed throughout your self-build project. A lender can release all of the money upfront, which means a small deposit could be acceptable.

If you want a lender to release the money in stages most will not release any money until building is underway. You will then need to have each stage assessed by a surveyor before the lender releases any more money. You will also only be able lend around 75% of your overall costs.

If you are short of cash you might want to consider borrowing the money in one lump sum at the start.

Mostly C – More Planning Needed

You still need to do a lot of work before a lender is willing to offer you a self-build mortgage. You should not go to a lender until you have at the very least your plans and costs drawn up. You will also need to save up some money and make sure that you have a deposit in place as a lender will not be able to offer you 100% of the overall costs.

If you are self-employed the lender could also ask for more security than the normal 5% especially if your income fluctuates annually.

With current housing stocks depleting more people are turning to self-build to fulfil their dream of owning their own home. It takes a certain type of person to embark on a self-build project and as well as having the correct finances in place you will need to be motivated and 100% committed to the project.

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