How much money do you need for a Self Build Mortgage?
Are you thinking of building your own home? It’s exciting, but one of the first questions we often get is “how much money do I actually need?”
A self build mortgage doesn’t work the same as a standard mortgage. Rather than borrowing a lump sum to buy a house, the money is released in stages as you build your house. And the total cost of your project will include extra costs like buying land, planning permissions, and making sure you’ve got a buffer in case anything unexpected comes up.
This can get confusing, so we’ve broken it all down to make it esay for you to understand. And if you’re looking for extra support throughout your self build journey? Then that’s where we come in. We help other self builders to understand their finances, manage their budgets, and avoid any unexpected costs.
Want to find out more? You can visit our Self Build Mortgage page, or book in for a free call with our team to talk through your plans.
Understanding Self Build Mortgage deposits
A self build mortgage works differently from a traditional mortgage. Instead of getting all the money upfront, it’s released in stages as your build moves forward. That also means that deposit requirements can vary depending on the total project cost and your lender.
How much deposit do you need?
Most lenders ask for at least 20-25% of the total estimated build cost. Some may accept a smaller deposit if you have other assets or a strong financial background.
For example, if your self build is expected to cost £300,000, you’ll likely be expected to have a deposit of around £75,000 to £90,000.
What affects the deposit amount?
Knowing how much deposit you’ll need for your self build mortgage isn’t always as straight forward as that. It can depend on a few different things that will be personal to your situation. Such as:
Do you own the land already? If you do, then you you likely won’t need any further funds.
What does your lender require? Some banks ask for higher deposits for self builds as they can be seen as a higher risk.
What’s your credit history like? A stronger credit score can help to get your better mortgage terms.
Breaking down the full cost of a self build mortgage
Your deposit is just one part of it. There’s lots more to think about when working out the total cost of your self build. We get our clients to also think about:
1. Buying the land
If you don’t already own the land, then this will be one of your biggest costs. The price of land depends on location, size and accessibility. So a plot in a busy area will cost more, but a cheaper rural plot might come with extra costs like installing utilities or road access.
If you so already own land, then this will reduce the upfront investment you’ll need, so will likely reduce your mortgage deposit requirements.
Looking for land? You can use our free Plot Prospector tool to get alerts for plots that fit your budget and needs.
2. Construction & material costs
The cost of building your home is a combination of things like size, design, and materials. Most building costs can range from £1,700 to £3,000 per square metre. Which means a a 150m² home could set you back between £225,000 and £450,000.
You can get an estimate by using our free build cost calculator.
3. Planning permission & fees
You’ll also need to budget for planning permission and professional fees. These are important, but can also vary based on how complex your build is and your local authority’s regulations. We tell our clients to expect:
Planning application fees: £500 - £2,000
Architect fees: £3,000 - £8,000
Structural engineer costs: £1,500 - £3,000
Building control & inspections: £1,000 - £3,000
Please note that these are just examples. Every build is unique, and fees can vary. At Mayflower Mortgage, we help our clients assess all expected fees in detail. If you want help with breaking this down for your project, you can book a call with us.
4. Contingency funds
One of the biggest mistakes self builders make is not setting aside enough extra money. No matter how well you plan, unexpected costs can always pop up. Having a buffer will save you stress later.
Besides it helping with the stress, most lenders will want you to have a contingency fund of at least 10 to 20% of your total budget. This is to cover things like:
Materials getting more expensive
Extra labour costs if the project runs over schedule
Planning restrictions or any design changes
For example, if your estimated build cost is £300,000, you should have an additional £30,000 to £45,000 set aside just in case.
How can you fund your self build?
If you’re getting concerned about the upfront costs adding up, then don’t worry. There are different ways that you can finance your self build apart from just using savings. The most common ways include:
Savings & Equity Release
Using personal savings is the most straightforward way to fund your self build deposit and initial costs. But if you already own a home, then you could also remortgage and release equity to help you fund your self build. This is good way to access extra funds without having to take out a separate loan.
If you’re not sure if this is the right option for you, we’re here to help you compare your choices and connect you with lenders who specialise in self builds.
Self Build Mortgage Options
A self build mortgage is specifically designed for projects where a home is being built from scratch, so it’s naturally one of the most popular ways to finance a self build project. Unlike standard mortgages, that provide a lump sum upfront, self build mortgages release funds in stages as your build progresses. This makes sure money is available at each stage of your construction process.
There’s two main types of self build mortgages to choose from. Picking the right one for you depends on how you plan to manage your cash flow:
Arrears Stage Payments:
This is the most common type of self build mortgage. Funds are released after each stage of construction is completed and approved by the lender. This means you will need to cover initial costs yourself before receiving the first payment.
Advance Stage Payments:
Some lenders offer funds at the start of each stage rather than after completion, which can improve cash flow and make it easier to manage costs. This is particularly helpful for those who don’t have large savings immediately available and need that to keep the project moving smoothly.
Government Schemes & Grants
If you’re looking for financial support beyond traditional lending, there are several government-backed schemes and grants that are there to help you reduce costs. These are supposed to make homebuilding more accessible and encourage more sustainable construction.
The Help to Build Scheme is one of the most well-known options. It’s a UK Government backed initiative that provides a low interest equity loan to eligible self builders. This can significantly reduce how much money is required upfront and make it easier to fund your project.
Additionally, energy efficiency grants are offered by some councils as an incentive for your build to meet their eco-friendly standards. This can also help you to save on your build costs whilst reducing your home’s environmental impact.
Understanding these schemes can be complex, but we can walk you through the options and help you to check your eligibility. If you’re interested, you can book a no-strings-attached call with us.
Tips to make your self build more affordable
Keeping the costs under control is often one of the biggest challenges for our self build clients. But the good news is that there’s plenty of ways you can reduce your expenses without having to sacrifice on the quality of your build. Our top tips to keep your costs in check include:
Planning a realistic budget. Working with an architect can help you create a detailed cost plan.
Using cost effective materials. Many of our clients use timber frames or modular constructions to save money.
Always get multiple quotes. If you compare builders and suppliers you can make sure you’re getting the best deal.
Do some of the work yourself. If you have the skills, then taking on some work like painting or landscaping can save you thousands.
Look for VAT refunds. Some self build costs are eligible for VAT reclaims and this can reduce your overall spend.
Your key takeaways for how much money you need for a self build mortgage
We know how exciting it is to be planning to build your dream home. But knowing your costs upfront will make your whole process a lot smoother.
Key takeaways:
Expect to put down 20-25% deposit on the total build cost.
Budget for extra costs like planning fees, contingencies, and buying your land.
Look into government schemes, remortgaging, and alternative finance options to help fund your build.
If you’re thinking about applying for a self build mortgage, then we’re here to help. As well as helping to secure your mortgage, we can help you with every step of your process. Our goal is to make the process as smooth as possible for you, so that you can focus on creating your dream home. Visit our Self Build Mortgage page to learn more about how we can help.