There are two main methods of financing a Self-Build and the first port of call should be www.buildstore.co.uk where you will be able to learn more to add to the brief synopsis we supply here.
Put simply, if you buy the land they will probably be able to arrange for a lender to fund the build. There are no payments made until the project is complete. It is a sort of bridging finance, so it is expensive, but if you consider that you will not have to pay anything until the project is complete, upon which time you can arrange for a normal mortgage if you are moving in, or you have sold, it can be a very effective way of raising far more capital than you would be able via any other financing option. We have included a Case Study below.
This type of financing is only available for self-build projects. It is based on a traditional mortgage for borrowing purposes, i.e. you can lend at the same sort of ratio to a traditional mortgage, in relation to your ability to pay. The mortgage is raised by the lender on the value of the land that you will own for your build. The major difference is that money is released in advance of each build section. So, for example, you will be provided with the funds for the timber frame, then the next stage, etc. As it is a fairly unique financing deal it is rather less competitive than a traditional mortgage. At current Interest Rates you would be looking at around 4% over base. Arrangement fees are typically between £2,000 and £3,000. The release fee is also rather punitive; as much as 3% on borrowings if you want to get out of the mortgage early – three years is often typical with these deals.