A guide to self-build mortgages

Have you been thinking about a self-build mortgage? Our blog details a few of the things that you need to know, to help you on your way to building your unique dream home.

Have you ever dreamed of building your own home? A place that reflects your personality and suits your lifestyle? If so, you’re not alone.

More and more people in the UK are turning to self-build projects to create their ideal living space and a self-build mortgage could be the key to making it happen.

In this blog we’ll walk you through the basics of self-build mortgages, current costs, and why now might be the perfect time to consider building your dream home from the ground up.

Your dream your style

The idea of a dream home is as unique as the person imagining it whether a sleek modern home in a city, a cosy cottage in the countryside or a renovation project, self-build gives you the freedom to bring your vision to life.

While there's no one-size-fits-all when it comes to design, there is one constant question, how much would it cost?

The average cost of a self-build home in the UK is estimated to be around £2200 per square metre. This would typically give you a specification above that of a standard developer new build (1).

To put this into perspective a 200 (m²) home is roughly the size of a four-bedroom detached house and would cost approximately £440,000 to build and fit out (1). This estimate assumes you are project managing some of the work yourself and hiring skilled tradespeople for the rest.

Yes, it's a significant investment but it's also one that more and more people are willing to make and for good reason.

Self-build in the UK a growing trend

The desire to build your own home has been steadily growing across the UK. According to the governments right to build register, introduced under the Self-build and Custom Housebuilding Act 2015, nearly 18,000 builds were registered in 2016. Fast forward to 2022/23 and that number has climbed to almost 62,000 (the latest figures available at the time of writing).

With mortgage interest rates recently reducing and property prices mainly on an upward trajectory, now could be a good time to consider undertaking a self-build as a path to tailoring your home to your exact needs and potentially maximising value for money.

But how do you fund such project? That is where a self-build mortgage comes in.

What is a self-build mortgage?

Unlike a traditional mortgage that provides a lump sum to purchase a property, a self-build mortgage is a specialist product that releases funds in stages throughout your build, from buying the land, through constructing the shell, making it weathertight and so on until completion.

Not all lenders offer self-build mortgages as some prefer to lend on fully built properties, which gives them a physical asset they can sell, should things go wrong. With a self-build, the asset does not exist until the build is finished. A part-finished house does not always fit with lenders conventional lending models – there is not enough security.

The good news is that Chorley Building Society is not like other lenders. As a mutual Society, we do not have shareholders to serve, and we’re not listed on the stock exchange.

Instead, all our profits go back into the Society to benefit our Members, and that includes those embarking on building their own home.

Build your savings before your home!  

As with any house purchase, the first thing to consider is your savings. 

Work out how much you have to spend by looking at your savings, any equity you might have in an existing property and what kind of funds your self-build mortgage will provide. 

This will give you an idea of what you can afford in total for the plot and construction, including professional fees, services, and a contingency fund.

Chorley Building Society has a great range of savings products for everyone, including:

• Easy access accounts
• ISAs
• Notice accounts
• Over-60s savings accounts
• Regional savings account
• Regular saver accounts
• Business Savings Accounts

You can apply for our savings accounts online, at your local branch or by post.

Why choose Chorley Building Society for your self-build mortgage?

We partner with Buildloan, to provide a wide range of options for building your dream home. Their specialist expertise helps us to serve brokers and intermediaries better. Speak to your mortgage broker or contact Buildloan for more information on Chorley Building Society self-build mortgages.

For existing Chorley Building Society self-build mortgage customers, we offer a range of products whilst you continue with your build and once you have completed your home. You can either speak to Buildloan or get in touch with a member of our team for more information.

Final thoughts

Building your own home can be one of the most rewarding projects you'll ever undertake but it requires careful planning and sound finances. With the right mortgage products to support your journey, and the increasing support for self-builders, now could be an ideal time to turn your vision into reality.

(1)   https://www.self-build.co.uk/what-does-it-cost-to-build-a-house/