Self Build Mortgages: A Guide

All you need to know about self build mortgages if you're planning to build your own home.

Why Build Your Own Home?

Despite the recession, an estimated 14,000 people completed a self-build home last year - a third of all new build detached properties and almost 7,000 more people bought a self-build plot, according to self-build expert, BuildStore. And with good reason – you get a property designed entirely around your needs in your chosen area, and in many cases, you can save up to a third of the price of a ready-built property.

Although the credit crunch restricted the availability of self-build mortgages, funding is still available for those wanting to build a home, and the weaker economy has seen plot prices tumble, so it’s still an good time to be a self builder.

How Much Can You Borrow?

The good news is if you can afford to buy a house, it’s likely a lender will agree a self build mortgage. How much you can afford to splash out on your new home will be restricted by the amount of money you can borrow, but it is possible to run a self-build mortgage along side your existing mortgage if you’d rather not sell your current home.

Self build lenders use the same income multiples as for traditional mortgages, so you can typically borrow up to 3.5 times a couple’s joint income or 4.5 times a single borrower’s income – although your ability to afford the mortgage is the key here.

Applying For A Self Build Mortgage

But getting a self build mortgage is more complicated and involves more paperwork than a traditional mortgage.

‘A lender will want to see the plans for the property and the projected building cost,’ says Louise Cummings, head of mortgages at MoneySupermarket.

You’ll also need to have the appropriate planning permissions in place. ‘At the very least, you’ll need outline planning permission but most lenders will expect you to have full planning consent. This shows to the lender that the plans have been submitted and agreed by the local planning authority for the building of a specific size and type of house,’ says Cummings.

Find out more about applying for planning permission at the government’s planning portal.