Self build finance: everything you need to know

Before focusing on the design, build and materials, it’s important to know your budget and how you are going to fund the build.

We’ve teamed up with BuildStore Mortgage Services, the UK’s leading self-build mortgage experts, to give you the low down on how to work out your budget, understand your borrowing options, and be best prepared when applying for funding.

Your budget is made up of how much money you already have and how much you can borrow. Your contribution to the build must be accessible cash. So if the money you wish to use is tied up in property it must be released.

If you decide to borrow, how much you can get depends on your individual financial circumstances. As with any mortgage, lenders will look at your income and outgoings to calculate how much they are willing to lend.

A standard self-build mortgage will typically let you borrow up to 75% of your plot and build costs. Other lenders available through BuildStore offer increased borrowing of up to 85% and in some cases 95% of your costs. If you already own your plot it may be possible to borrow enough to fund your build costs in full.

When buying a property using a traditional mortgage, your priorities will be:

• A low-interest rate.
• Minimal fees.
• The total loan amount.

With a self-build, your main priority is making sure you will have enough money available to complete each stage of your build.

A consistent flow of funds is key to any successful self build. The availability of funds during your build must be a factor when choosing how you borrow. Your mortgage should be tailored to suit your financial circumstances, build and payment schedule.

It’s not just about how much you can borrow but when that money is available to you throughout the build. This will allow you to pay your tradespeople and suppliers – whether that’s monthly, weekly or daily!

As your self build home will be paid for in stages, a self-build mortgage is more suitable than a traditional mortgage. It releases funds in stages, rather than as a single amount, either before or after each stage of building works.

BuildStore’s unique and exclusive mortgages can provide guaranteed stage payments based on your build costs before each stage of works. This gives you the peace of mind of knowing you can plan for and pay your bills on time.

When works are complete, you can switch onto one of your lender’s traditional mortgage deals.

If you’ve chosen an off-site manufactured building system like a timber frame, SIPs or ICF you may need to pay for it in full before it leaves the factory. With BuildStore, you’ll have the cash you need to meet your supplier’s payment terms. What’s more, as a cash buyer you can take advantage of the best deals and time restricted offers on materials.

If you have enough equity in your current home or own it outright you could remortgage or secure a bridging loan to pay for the plot, fund your build costs or both.

When it comes to funding your self build, it’s important to speak with an expert mortgage adviser like BuildStore. We can look at your financial circumstances and build requirements to tailor a borrowing solution to suit you.

Then when your new home is finished, you can sell your old one to pay off the loan. This way you can stay in your current home during the build and avoid the upheaval of moving, living onsite or renting.