How Does A Self Build Mortgage Work?

self build mortgage

What is a self build mortgage?

A self build mortgage is a type of loan designed for those who want to build their own house instead of buying an existing home. They are usually more flexibile than traditional mortgages, as they are structured to accommodate the financial needs and unique requirements of self builders.

What is the difference between a self build mortgage and a normal mortgage?

Uusally with a self build mortgage, the funds are given in stages instead of all in one go. This makes it less likely that you’ll run out of money halfway through your self build, which in turn means that there is less risk to the lender. A self build mortgage is designed to ensure that you spend the money as you initially planned.

What types of self build mortgage are there?


This is the more common type of self build mortgage in the UK. Funds are released after the completion of each stage of construction. In other words, you are expected to cover the cost of each stage yourself. You’ll request reimbursement from your lender after the work has been inspected and approved.

For an arrears mortgage, you’ll need to have enough savings to finance each stage of construction as you won’t receive reimbursement from your lender until afterwards. The lender will usually send a surveyor to confirm that your self build is consistent with the payments you have requested.

A benefit of this style of mortgage is flexibility. You have more control over the construction process and can get things done in your own time. The risk to the lender is also lower, as they don’t release the funds until after the work has been completed and verified.


This type of self build mortgage is also known as a build cost mortgage. It is the less common of the two. You receive upfront funding for the construction process. In other words, the lender provides funds at the beginning of each construction stage rather than at the end. This means you have access to the money as you go along.

Advance self build mortgages are less common in the UK. They are not offered by all lenders. However, they are better for those who do not have substantial savings to cover upfront construction costs.

There is a higher risk to the lender with this type of self build mortgage. Because of this, you may need to provide a more detailed and robust financial plan in order to secure this style of mortgage.

What are the pros and cons of self build mortgages?

Benefits of self build mortgages

• A self build mortgage allows you to create a home that is perfect for you in every way. Because you are the one designing it, you can choose all the features of your new home and build something that precisely matches your preference and lifestyle.
• Getting a self build mortgage could work out cheaper than getting a mortgage on a new home if planned well. Because you can shop around for materials and labour, you have a better chance of saving money in comparison to purchasing a pre-built property.
• Building your home can often result in a good amount of profit if the project has been well executed.
• Self build mortgages are typically more flexible in terms of stage payments and project management. They allow you to adapt to changes or delays.

Drawbacks of self build mortgages

• Self build mortgages can be riskier than traditional mortgages. You’re responsible for managing all construction costs, and unexpected expenses can arise.
• You’ll usually need to have a significant amount of money in your savings to cover the initial costs (such as finding a self build plot and obtaining planning permission) before you can get a self build mortgage.
• Interest rates are generally higher with self build mortgages than on normal mortgages. This is due to the additional risk involved.
• The construction process can end up taking longer than you expect. This can lead to higher interim financing costs and longer periods of living in temporary accommodation.

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