Self-build mortgages are normally arranged on a stage payment basis where the loan is advanced at pre-determined instalments as each stage of construction is completed. After each instalment is released, you will need adequate funds to cover the build costs of the next stage until it is completed and the next instalment is released.
Only mortgage finance for your own private residential use will be considered and not for second properties, holiday homes, semi-commercial or development properties.
Stage payments are normally released in 4 or 5 instalments depending on the individual lenders' criteria with the first instalment released on completion of the foundations, stage 2 when the wall plate level is reached, stage 3 when the property is wind and watertight, stage 4 on first fix of the services and stage 5 when the property is complete.
The lender usually retains 10% of the project costs until the house is complete, the completion certificate issued and the property is re-inspected by the valuer.
Most self-build mortgage schemes release the stage payment instalments in arrears at the end of each stage of construction but some lenders provide a scheme where the stage payments are released in advance at the start of each stage of construction thus providing the funds upfront to carry out the project.
You will need to provide a number of documents when submitting your application including detailed planning consent, building regulations, architects plans, project costings incorporating a minimum 10% contingency allowance together with firm and detailed plans for the construction of the property together with a timetable to show that the property will normally be completed no more than 24 months after the date of the mortgage offer.
The lender will also require confirmation from the architect or supervising consultant that they have had previous experience of supervising such projects, are suitably qualified and have adequate professional indemnity insurance.
The amounts released are subject to confirmation by interim valuations carried out after each stage of construction supplied by your architect or consultant and final certificates on completion of the build.