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A self build mortgage is released at key stages of the build unlike a traditional mortgage where funds are released in one lump sum upon sale completion.
Some self build lenders will lend on the plot purchase too, but not all do. Rates of interest are typically higher than the standard house purchase/remortgage rates currently available, and the arrangement fees also vary from lender to lender. Once the property is habitable, some lenders permit the borrower to switch to a lower rate of interest.
This is where stage payments are given as each stage of the build is completed. The arrears-type self build mortgage is suitable for those who have a large cash injection of their own to put into the project
where the stage payments are released at the start of each stage of the build. This means money is available at the point of need when labour and materials bills are due — removing the need for short-term borrowing/bridging loans to cover the shortfall. The obvious advantage here is that this type of product assists cash flow and is generally better suited to those who do not have large pots of savings to fund the build as it progresses. There are fewer lenders who offer this facility though.
Self builded mortgages can be troublesome to get together but we have a large selection of providers with whom we have a great relationship so you can come to us with confidence that your dream home can become a reality.