Raising the money to build your own home

Building your own home can cost less than buying a house already built by a developer. You need to find a bank or building society that provides self-build mortgages.

Self-build mortgages

A self-build mortgage is different to a house buying mortgage.  With a self-build mortgage, the lender releases money to the borrower in stages not as a single amount as the build progresses.

There are two types of self-build mortgage:

  • an arrears-based mortgage releases money in staged payments as each stage is completed
  • an advance payment scheme releases money before each stage of construction and removes the need for bridging loans - the stages can be fixed or flexible but there are usually five and these depend on the type of building work

Banks and building societies offer mortgages to self-builders. Most mortgage companies don't offer an advanced payment, due to the risk involved.

Living in a property while building a new home

If you want to stay in your current home while you build your new home, you need to discuss any unpaid mortgage  with the lender.

You also need to make sure that you have enough income to cover both mortgages.

Working out your budget

You need to plan your budget carefully to know how much the project is going to cost.

Your mortgage lender will ask for this. You need to make sure that you have covered all your costs such as land costs, professional fees, building work and materials.

It is important to have the right insurance and warranty cover to protect you  against some of the risk if things go wrong. You also need to pay your legal expenses for buying the land.

Your budget should include an amount to pay unexpected costs.

Getting professional help to plan and build your home

Make sure you know what you can do yourself and employ an architect, surveyor, planning consultant and project manager if necessary. You need to hire an experienced, reliable builder. 

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