Building your own home is an exciting and ambitious endeavour. It allows you to create a living space tailored precisely to your needs and preferences. However, financing such a project can be complex. At Bloomfield Mortgages, we understand the unique challenges of self-build projects and we’re here to guide you through the process. In this article, we’ll explore what self-build mortgages are, how they work, and key considerations to keep in mind.

What is a Self-Build Mortgage?

A self-build mortgage is a specialised loan designed for individuals who wish to construct their own homes rather than buy existing properties. Unlike traditional mortgages, where funds are released as a lump sum, self-build mortgages typically release funds in stages as the project progresses. This staged payment structure meets the distinct cash flow needs of a self-build project.

How Do Self-Build Mortgages Work?

Self-build mortgages generally follow a staged payment plan that aligns with the key phases of construction. These stages typically include:

1. Purchase of Land: Initially, you receive funds to cover the cost of the land where you intend to build.
2. Initial Construction: Next, you get funds for groundwork and laying the foundation.
3. Building the Structure: As the house structure goes up, you receive additional funds.
4. Internal Works: Subsequently, you get funds to cover internal fittings, electrical wiring, plumbing, and other interior work.
5. Completion: Finally, you receive the last tranche upon project completion, ensuring all construction work is finished.

This staged approach helps manage risk for both the borrower and the lender, ensuring funds are available as needed while keeping costs under control.

Types of Self-Build Mortgages

There are two primary types of self-build mortgages:

1. Arrears Stage Payment: You receive payments after each stage of construction is completed and inspected. This type requires you to have available funds or credit to cover initial costs until reimbursement.
2. Advance Stage Payment: You get payments at the beginning of each stage, providing funds upfront. This option can be beneficial if you need cash flow to start each phase but may be harder to obtain as it poses a higher risk to the lender.

Key Considerations

When planning your self-build project, keep the following considerations in mind:

Budgeting

First and foremost, create a careful and realistic budget. Overruns are common in construction projects, so include a contingency fund to cover unexpected expenses.

Planning Permission

Next, obtain the necessary planning permissions and building regulations approvals before starting your project. Delays in these areas can stall your project and lead to increased costs.

Insurance

Additionally, get specialised insurance coverage for your self-build project. Standard home insurance policies typically do not cover self-build risks. Consider options like self-build insurance, which covers the project from start to finish.

Professional Advice

Furthermore, engage with professionals such as architects, builders, and mortgage brokers early in the process. Their expertise helps you navigate the complexities of a self-build project and avoid common pitfalls.

Why Choose Bloomfield Mortgages?

At Bloomfield Mortgages, we offer expert advice and tailored mortgage solutions for your self-build project. Our experienced team understands the intricacies of self-build financing and helps you find the right mortgage product to meet your needs. We commit to making your dream home a reality, providing support and guidance every step of the way.

Embarking on a self-build project is a significant undertaking, but with the right planning and financial support, it can be a rewarding and fulfilling experience. Contact Bloomfield Mortgages today to learn more about our self-build mortgage options and how we can help you fund your custom home project.