Self Build - Stages

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Self Build Mortgages represent specialist lending and they are currently available from around 30 UK providers.

These types of mortgages differ from normal residential mortgages in that payments are made at a number of separate stages, which represent logical breaks in the overall building process.

Typically these stages might be:

  • Purchase of land
  • Completion of the footings and foundations
  • Erection of the walls and roof to the extent the “shell” of the building is substantially watertight
  • Completion

Halifax is one of a few lenders who will also allow clients to receive an initial stage payment to help them to buy the land as well as releasing funds at the more usual build stages.

Summary of key points

  • Maximum loan to value – 75% of the final valuation and the loan must not exceed the total cost of buying the land and cost of build works
  • Funds are released in up to 5 stages which includes the initial release. The initial release can be up to a maximum of 75% of the current value. Where funds are being released for land purchase it must also not exceed 75% of the price of the land paid by the applicant. Where all the land has been gifted the first installment will not be released until footings and foundations stage has been reached. When the construction reaches the appropriate stages, further releases up to a maximum of 75% of the current value at each stage less the amount we have already released can be considered. However, for the penultimate stage release a minimum of 10% of the total loan will be retained, as a final release, until the property is complete and we are in satisfactory receipt of the final completion certificate.
  • Stage releases are subject to a satisfactory re-inspection by our valuer and provision of the appropriate Architects certificate/Building Indemnity cover for that stage

There are two main types of self build mortgage (Halifax uses arrears based mortgage):

  • Arrears-Based Mortgage
    Offered by the majority of lenders, this type of mortgage allows clients to receive each stage payment after the stage has been completed.
  • Advance Stage Payment Scheme
    Clients receive each payment before the stage is actually commenced. This type of mortgage is riskier for the lender, as a result they are usually more expensive for the customer.

Structural warranties and guarantees

Before lending on newly built homes Banks and Building Societies usually require either confirmation that an acceptable building standards indemnity scheme is in place or confirmation that the supervising consultant/architect can meet specified criteria.

Lenders should be contacted to establish which guarantee/warranty providers they are prepared to accept and the criteria that the supervising consultant/architect must meet.

Other self build mortgage criteria

While every self build mortgage lender will have its own specific set of criteria to be satisfied, most will require copies of the build plans and planning permission to be provided to their valuer on or prior to inspection of the land and throughout the property build stages.

Lenders also typically need to know if and when any existing mortgage commitments are to be repaid. This is of particular significance for self build applicants, many of whom will not be in a position to redeem their current residential mortgage until their new property is complete. Applicants will therefore need to be able to simultaneously satisfy their lender's affordability requirements in respect of both their current mortgage and the new self build mortgage being applied for.

Visit the Self build homepage for full details of Self Build Mortgage products, service and criteria.

Our tracker rate mortgages are linked to Bank of England bank rate (also known as Bank of England repo rate). Details of this rate can be found on the Bank of England website at www.bankofengland.co.uk.

For independent information on mortgages, visit the website 'Money Advice Service'.

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