Self-Build Finance

Self-build finance differs from other types of property financing and traditional mortgages that are taken out across the UK every year. Self-build properties tend to be main residence for the property owner and borrower and therefore are often deemed to be regulated mortgage contracts.

This type of finance is also the perfect way for a borrower to fund a truly unique and hugely exciting project; building their own home. With only around 10% of UK homes categorised as true 'self-builds' (source: Nationwide), the market is small in comparison to other forms of property finance that are available.

It is therefore very important that the lender supplying the finance is one that knows this market well and has experience in providing this specialised form of finance to ensure you have the correct funds, at the best rates to build your dream home.

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At SPF Short Term Finance, we have a dedicated team of experts who, as part of our multi award-winning team work with a plethora of lenders from across our network to make sure you get the best self-build finance available to you.

We have over 21 years of experience as property finance intermediaries and have secured dozens of satisfied clients with the ideal finance solutions and loans for their specific requirements.


What Makes Financing a Self-Build Different?

Typical mortgages entail borrowing an agreed amount of money at an agreed rate and over a pre-arranged time frame; secured upon a property, to act as ‘security’ for the loan. At the end of the mortgage term, the borrower then owns the entire property in question. Self-build finance however works quite differently.

In the case of self-build finance, the property is built from scratch. The entire process, from purchasing the land to the final touches of the project is managed according to the loan taken out, its stages and the pre-agreed terms. The process of a self-build finance arrangement tends to last longer than that of other property finance options. The property will be built in stages and as such, the money to be borrowed will usually be released to the borrower in stages too, reflecting the progress of the project in question.

Furthermore, because the market for self-build financing is smaller than that of most other property finance (such as bridging finance), there are fewer lenders who are willing to lend the money needed to undertake the project. In most circumstances the application process and post-completion monitoring programmes is non-standard, making for a truly bespoke arrangement.

The Benefits of Self-Build Homes

There are a number of distinct advantages to ‘self-building’ a home. Self-build finance allows you to plan and create the home of your dreams, adding every personal touch you wish. Furthermore, from the initial phases to the end, you will be able to manage your own property’s progress in a way not otherwise available.

According to This is Money, self-build homes sold on the open market tend to fetch 20% or more than their build costs making them very handsome investments. This would mean that selling a property that cost £500,000 to build; the seller could reasonably expect £100,000 or more on top of the build price.

Having the money released in stages will also help to manage each stage and stick to budget which will help keep overall costs down. In addition, once the build is complete and the all of the money of the loan has been released, you may be able to remortgage the property to pay off the self-build loan and move towards a cheaper solution.

How Does a Self-Build Mortgage Work?

There are two main types of self-build mortgages. These are known as either 'arrear' or 'advance' mortgages and they differ slightly with what they offer the borrower:

Arrears Arrangement - This type of self-build loan is particularly suited to those who can fund at least the initial stages of the build. The principle of these loans is that the borrower will lay out the funds for the stages they can afford and the lender will reimburse them upon completion of each stage, whereby the appropriate funds will be released. However, the lender will not release any of the money until they have had an approved professional visit the site and confirm that the money has been spent.

Advanced Arrangement - In these cases the lender will pay out advanced payments, prior to each stage being completed. This will continue until the project is complete. This type of arrangement favours those who may not have sufficient funds or savings available to lay out for all or some of the stages of the project.

The Stages Involved

Self-build projects are commonly carried out in stages until the entire project is complete. A typical project may entail the following stages:

  1. Purchasing of Land - Before any building commences, this will entail purchasing the land upon which the property will be built and ensuring all the necessary regulations are adhered to and all required permissions have been granted
  2. Initial Phase and Foundations - This is the start of the building of the property, during which time foundations will be dug to the depth according to the size of the planned property
  3. Wall Plate Level or Frame Erected – This will depend on whether the property is made from ‘brick and block’ or timber. In principle this entails constructing the framework and the ‘shell’ of the property
  4. Wind and Watertight – This is where the framework gets filled, the external walls constructed and the property protected from the elements
  5. First Fix and Plastering – The internal walls will be built, electrics, water and gas may be run and the plastering carried out; ready for the final stage of the process
  6. Second Fix to Completion – The final stage, where the final touches are applied and the property is completed, ready to move into

Contact us to explore your Self-Build Finance Options

We have more than 21 years’ experience in providing the perfect property finance to a multitude of clients for all nature of projects. Our self-build finance team will ensure you get the best arrangement from one of the established lenders in our extensive network.

Call Us – 0333 222 6687

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A fee of up to 1% of the loan amount is payable. For example, if we arrange a loan of £100,000 the fee could be £1,000. The exact fee charged will depend on the amount of work undertaken.

SPF Short Term Finance is a trading style of SPF Private Clients Limited which is authorised and regulated by the Financial Conduct Authority (FCA).

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