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Accessing a Self-Build Mortgage

While you probably won't want to make a formal mortgage application before you have identified a plot of land and estimated your build costs, it is important to get financial advice at an early stage to be confident that you will be able to get a big enough mortgage. Even if you don't need a mortgage to help you buy your plot, you should try to be sure that you get a mortgage offer before you commit to buying a plot to avoid any nasty surprises later on.

You will need a specific type of mortgage for self build because a self build mortgage is normally paid in instalments at certain stages during the build process and the lender needs to check progress at these stages to make sure it is satisfied that the work has been carried out before the next instalment of the mortgage is paid out. Only some lenders offer self build mortgages so it may be easiest to find a suitable mortgage by using an Independent Financial Adviser (IFA) or mortgage broker, who will be able to find out what available products may be suitable for you. There are IFAs across Scotland who are regulated by the Financial Services Authority. To find a suitable IFA in your area, try searching via the Unbiased website (make sure that you indicate you are looking for a self build mortgage as not all advisers can provide advice on self build). However, alternatively you may wish to seek financial advice from an adviser who specialises only in self build mortgages.

Whatever mortgage you choose, you will be required to provide a significant deposit to fund your build. In many cases at the moment, lenders will not provide any mortgage funding until your build reaches 'wind and watertight' stage i.e. the main structure of the building is complete and weatherproofed (this is in order to reduce the risk to the lender in case the project is abandoned when the home is only part built). Lenders also generally pay for each stage of the build in arrears i.e. once it is complete. If you don't have enough savings or other ways of borrowing the money to finance the purchase of the land and the initial stages of the build, it may be possible to get mortgage finance at an earlier stage. This can either be through a specialised mortgage product which pays instalments in advance or in some cases you may be able to agree a form of bridging loan with your current lender to fund the construction phase (which allows you to take a standard mortgage when your home is complete).

An IFA or broker will be able to let you know which lenders currently offer self build mortgages as mortgage products change all the time. If you don't want to use an IFA though, you may wish to approach a number of building societies as they are the lenders which most commonly offer self build mortgages.

Next: Working out what type of home you want