If you’ve always dreamt of designing your own house, we could help bring this fantasy into reality with finance for self-builds. However, which loan is best for you and your needs will depend on a number of factors. Read on to discover your self-build finance options.
How Much Does it Cost to Build a House?
Build costs vary greatly. This depends on various factors such as size, spec, and cost of materials and labour. The average cost runs between £2,300 and £3,600 per square metre according to self-build enthusiasts LivedIn.
For a typical 150 square metre detached home, that’s a self-build cost of between £345,000 and £540,000.
Types of Self-Build Finance
Self-Build Mortgage
A self-build mortgage is a type of specialist finance designed for the construction, renovation, or conversion of a home. Lenders require planning permission, detailed plans including architectural drawings and a works schedule, as well as a deposit of at least 20-25%.
A self-build mortgage is typically paid by the lender in stages, releasing the cash at key construction milestones such as:
- Initial funds – so you can purchase land and get started.
- Milestone checks – funds are released when certain progress is complete, such as foundations being laid or the property becoming watertight.
- Full repayment – Once the home is complete, a self-build mortgage will typically convert to a standard residential mortgage.
If you need money fast, want the funds released all at once, or don’t have a large deposit, a self-build mortgage may not be suitable for you. However, an alternative could be.
Self-Build Bridging Loan
You may want to consider a bridging loan for a self-build if you have a tight turnaround and cannot wait for a mortgage application to be processed.
A bridge loan may also be for you if you’d like to roll up the interest and not make monthly payments, controlling your cash flow and paperwork during construction.
You can use a bridging loan for almost any legal purpose, and funds can be released in days. However, a bridge is a short-term loan (usually no longer than 24 months) and has higher rates than a typical mortgage. To ensure a better deal, a lender could ask you to prove you have an exit strategy on application (such as remortgaging, liquidating shares, or selling another property) and require evidence of planning permission, a build scheme, and a deposit of at least 25% of the current value.
Many of our previous customers have chosen bridging finance when purchasing a plot at auction or in a bidding war, refinancing to a longer-term finance option once the work is underway.
Self-Build Land Finance
If you’ve found your dream self-build plot and don’t want to miss the chance to buy it, consider land finance.
Land finance for self-build developers does what it says on the tin. It is a specialist form of finance designed for the purchase of a plot of land, and sometimes construction on it too.
Even if the site doesn’t come with planning permission, land finance can help you act quickly and make that plot purchase.
Self-Build Development Loan
While you can technically use development finance for a self-build, this type of finance is designed for commercial purposes where an experienced developer intends to rent or sell on completion. As a result, the interest rate will likely be higher than a self-build mortgage.
Bespoke Finance Based on Your Plans
If you’re ready to take the next step, get in touch today to speak to an advisor and get a free quote. We offer a personal approach to finance and can help build a deal that suits you.
