How Self Build Mortgages Work

There are many options in the UK for mortgages.  You will find that if you are looking to build a home you will have just a few choices in what you can do.  When you build your own home you have what is called the self build mortgage option.  This option allows you to build a home with a mortgage.  This article will help you figure out how a self build mortgage can work for you and how they are designed.  First the main difference between other mortgages and the self build mortgage is that the money is released in stages.  The bank wants to make sure you are getting the job completed properly.  This means that they are not going to allow for any money to be released until the bank is assured that you are progressing properly on the house.
                                                                                                         
You will find that some lenders are not going to allow for more than 75% to 80% of the homes complete value to be mortgaged out.  In other words you will have to be able to finance a portion of the house yourself.  There are a few ways that your can structure a self build mortgage.  First you can have a fixed or flexible self build mortgage depending on the lender you choose.  You should be aware that there are only five ways you can get the money lent to you for a self build mortgage.

There are two methods that the money can be released, with a self build mortgage to you based on the type of self build mortgage you will have.  First you can have the money released during the building at the end of each stage or at the start of each stage.  The methods for self build mortgages are called arrears stage payments or advance stage payments depending on how the money is released.  You will find the arrears stage offers the money to be released after the stage is complete.  In other words you will find that you have to supplement the stages with your own money or the money for the previous stage to help you through the next one.  This means that you will begin the home with your own money and as the stages are complete you are going to be getting the money for that stage from the self build mortgage. 

With the advanced stage payment method you are going to find yourself being paid for each stage in advance, and until the stages are completed properly you are not going to get the next stage with the money from the self build mortgage.  In other words when you complete a stage you will be able to get the money for the next stage.  This will help you keep your own income out of the process for the most part.  This helps you keep the money you have for the incidentals you may need during the project or at the very least keep the income you make for the final stage of the house completion.  Keep in mind that during the build you are going to be required to pay on the self build mortgage.