Paying for a self-build project is slightly different from buying a complete property, because you’ll be funding the building work over a period of weeks or months, rather than completing one big purchase. Most people will need to get a mortgage to do this, although if you have savings, this can help offset some of the costs, for example paying rent for temporary accommodation during the build.
Because self-build is a relatively small market at the moment, there aren't a wide range of standard mortgage options to choose from. To get a mortgage for a self-build project, you’ll need to speak to a few lenders to work out what the best option for you is. They’ll need to check the plans in detail before they decide whether to lend to you.
Usually, funds from a self-build mortgage are released in stages, so that you have funds available during the building process. Your lender will need to carry out regular inspections to make sure everything’s going according to plan before they sign off each instalment of the funds.
This extra involvement and administration cost for the lender means that a self-build mortgage is likely to be more expensive than a standard mortgage for the same amount – though of course you may need to borrow less. Once the build is completed, many self builders switch to a different mortgage deal.
Many people choose self-build because they want to create a home they expect to stay in for good. But if you do choose to move from your self-build property, the good news is that its resale value may well be higher than what you paid to build it. This is money estimates that self-build properties sold on the open market could fetch 20-25% more than their build costs – although this of course depends on location, build quality and the state of the wider property market.