BELFAST CITY CENTRE: 028 9013 7392 | EAST BELFAST OFFICE: 028 9560 9410 | ORMEAU ROAD, BELFAST: 028 9521 9349 | LISBURN RD BELFAST: 028 9521 9351 | DROMORE: 028 9210 6060 | LISBURN: 028 9279 4300 | GLENGORMLEY: 028 9072 7636 | ARMAGH: 028 3743 0770 | LURGAN: 028 3898 4004 | DUNGANNON: 028 8747 0270 | COALISLAND: 075 6180 7334 | COOKSTOWN: 028 8673 1055 

Contact Your Local Branch

BELFAST, CITY CENTRE: 028 9013 7392
BELFAST, EAST OFFICE: 028 9560 9410
BELFAST, ORMEAU ROAD: 028 9521 9349
BELFAST, LISBURN ROAD: 028 9521 9351
DROMORE: 028 9210 6060
LISBURN: 028 9279 4300
GLENGORMLEY: 028 9072 7636
ARMAGH: 028 3743 0770
LURGAN: 028 3898 4004
DUNGANNON: 028 8747 0270
COALISLAND: 075 6180 7334
COOKSTOWN: 028 8673 1055

Your Self-Build Mortgage Journey with The Mortgage Clinic

by | Jun 3, 2024 | Uncategorized | 0 comments

Building your own home is an exciting journey, but financing it can be complex. At The Mortgage Clinic Lisburn Road Belfast, we specialise in self-build mortgages, providing you with the expertise and support needed to turn your dream home into a reality. Whether you’re just starting to explore your options or are ready to begin the building process, our guide will help you understand everything you need to know about self-build mortgages, from finding the best rates to selecting the right lenders.

With The Mortgage Clinic Lisburn Road Belfast, you can access a range of options and expert advice to find the mortgage that best suits your needs. Our dedicated team is here to guide you every step of the way, ensuring a smooth and successful journey to building your new home.

What is a Self-Build Mortgage?

A self-build mortgage is for anyone who wants to build their own home but doesn’t have the funds needed upfront. Unlike standard residential mortgages, which are not suitable for funding a house build, a self-build mortgage is specifically designed to meet this need.

Most self-build mortgages in the UK are offered by building societies and specialist lenders. However, a few mainstream lenders, such as Halifax, also provide these products.

Unlike traditional mortgage loans, self-build finance is released in stages throughout the building process. As your home progresses and becomes more valuable, the lender gains confidence and releases the next portion of funds. This method aligns with the increasing value of the property as it nears completion.

Some lenders allow you to include the cost of buying land in your self-build mortgage, but others only lend to those who already own a building plot. If you need to purchase development land, you might also consider land mortgages.

How Much Can I Borrow with a Self-Build Mortgage?

When considering a self-build mortgage, the amount you can borrow depends on your personal affordability and credit score, but the calculation differs from that of a ready-made home.

Most lenders will offer up to 75% of the total build cost if you already own the land you intend to build on. This typically means you’ll need around a 25% deposit. However, if you qualify, the Help to Build scheme may provide a government equity loan for up to 20% of the deposit cost, making it easier to manage the initial outlay.

If you’re using the self-build mortgage to purchase the land as well as complete the build, the borrowing calculation may differ. Lenders often provide a specific self-build mortgage calculator to give you a good estimate. However, it’s often best to speak to an experienced broker, like those at The Mortgage Clinic Lisburn Road Belfast, who can guide you through the nuances of specialist mortgage products.

Eligibility Criteria for Self-Build Mortgages

Qualifying for a self-build mortgage is similar to meeting the requirements for a standard mortgage, with a few additional considerations. At The Mortgage Clinic Lisburn Road Belfast, we help you navigate these criteria to ensure a smooth application process.

Personal Criteria

  • Affordability: Lenders will assess your income and outgoings to determine how much you can afford to borrow.
  • Creditworthiness: Your credit score will play a significant role in your eligibility and the terms of your mortgage.
  • Age: There are typically age limits for mortgage applicants, which can vary by lender.
  • Deposit: You will need a significant deposit, usually around 25% of the total build cost.

Types of Self-Build Mortgages

In the UK, there are two main types of self-build mortgages, distinguished by the timing of fund releases: self-build arrears mortgages and self-build advance mortgages.

Self-Build Arrears Mortgage

With a self-build arrears mortgage, funds are released after each stage of the building project is completed. This means you need to finance each stage yourself before being reimbursed by the lender. While this option can be challenging for cash flow, it usually comes with lower interest rates compared to advance mortgages.

There are two ways the money can be released under an arrears mortgage:

  • Cost-Based: The lender releases funds based on the amount you’ve spent on the project.
  • Value-Based: A surveyor evaluates the property at each stage, and funds are released based on this valuation.

Self-Build Advance Mortgage

A self-build advance mortgage releases an agreed amount of money at the beginning of each stage of the build. This provides you with the necessary funds upfront to purchase materials and hire workers.

This type of mortgage is ideal if you don’t have the cash available to start each stage of the project. However, because it poses a higher risk to the lender, you should expect to pay a higher interest rate compared to an arrears mortgage.

Advantages of Self-Build Mortgages

Opting for a self-build mortgage with The Mortgage Clinic Lisburn Road Belfast offers several significant benefits. Firstly, building your own home can often be cheaper than purchasing an existing one. Additionally, you only pay stamp duty on the land you buy, not on the final cost of the completed home, leading to further savings.

Another advantage is customisation. You have the freedom to design and build a home that perfectly suits your needs and preferences, incorporating energy-efficient and sustainable features from the start.

There are also interest savings to consider. Interest is only charged on the funds that have been released. This means you won’t pay interest on the entire loan amount from the outset, potentially reducing your overall interest payments.

Finally, once your build is complete, you can switch to a mainstream mortgage to access potentially lower interest rates, further reducing your long-term costs. Choosing a self-build mortgage provides the opportunity to create a home that meets your exact specifications while managing your finances effectively throughout the build process.

Differences Between Self-Build Mortgages and Traditional Mortgages

When you get a mortgage to build a house, there are some significant differences compared to a traditional residential mortgage. Firstly, interest rates for self-build mortgages are typically higher. However, once the build is complete, you may have the option to remortgage to a cheaper deal.

Another key difference is the maximum loan-to-value (LTV) ratio. With a self-build mortgage, you can generally borrow up to 75% of the build cost, whereas traditional mortgages might offer higher LTV ratios. This means you usually require a larger deposit for a self-build mortgage, typically around 25%.

The release of funds is also handled differently. In a traditional mortgage, the entire loan amount is released at once. In contrast, with a self-build mortgage, funds are released in stages throughout the construction process, aligning with the completion of specific phases of the build.

Understanding these differences is crucial when planning your self-build project. At The Mortgage Clinic Lisburn Road Belfast, we guide you through these unique aspects to ensure you are fully informed and prepared for the journey ahead.

Making Your Self-Build Dream a Reality with The Mortgage Clinic Lisburn Road Belfast

Embarking on a self-build project is an exciting yet complex journey. At The Mortgage Clinic Lisburn Road Belfast, we are here to simplify the process and help you navigate the unique challenges associated with self-build mortgages. Our expertise and dedicated support ensure that you find the best mortgage options tailored to your specific needs.

From understanding the differences between self-build and traditional mortgages to guiding you through the eligibility criteria and funding stages, we provide comprehensive assistance every step of the way. Whether you’re looking to design an energy-efficient home, manage your finances effectively during the build, or switch to a mainstream mortgage post-completion, we are committed to helping you achieve your dream home.

If you’re ready to take the next step towards building your own home, contact The Mortgage Clinic Lisburn Road Belfast today. Let us help turn your vision into a reality with expert advice and personalised service.

Helmut Elstner

Managing Director – Independent Mortgage Broker and Insurance Advisor

Helmut started working in financial services in early 2012 and founded The Mortgage Clinic in Belfast in early 2015. He specialises in all types of mortgages from First Time Buyer, Co-ownership, Self Build, Home Movers, Remortgages, Debt consolidation, to Buy to Let.

Three Best Rated Winner 2021
Winner Mortgage Broker of the year 2020
Top Rated Advisor 2021 on Vouchedfor