Updated: April 09, 2024
Self-Build Mortgages for First-Time Buyers
Are you a first time buyer who is thinking about a self-build project? It can be done!
Find out how to do it, who the main lenders are and more in our guide.
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Conventionally, first-time buyers tend to opt for a new build or pre-owned property, but a handful have more ambitious plans to self-build their first home. While this isn’t the most common route to homeownership, it’s one that various lenders can cater for.
If you’re a first-time buyer building a house, this article will explain your mortgage options and how to approach your application for the greatest chance of success.
Can you get a self-build mortgage as a first-time buyer?
Yes, you can. Around 1 in 3 lenders offer self-build mortgages, and the majority of these will consider applications from first-time buyers. So, you’ll have a smaller choice of lenders than others, but you still have plenty of opportunities to find a mortgage.
Of the lenders available, several consider self-build mortgages for first-time buyers to be particularly complex cases that require direct negotiations with their sales team.
This would mean you’ll stand a much better chance enlisting the help of a broker to negotiate with them on your behalf.
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How to get a self-build mortgage if you’re a first-time buyer
Applying for this type of mortgage takes a little more planning and preparation than others. The lender is taking more risk, as the building they’re accepting as security for the loan is not yet complete, so they’ll need more reassurance that the loan will be repaid.
Here are the steps to follow for the best chance of success.
Prepare your project plans
The lender will want to see every detail of your self-build project, including:
- Budget and cost projections
- Project timelines and contingency plans
- Site maps and floor plans
- Risk assessments
- Planning permission
- Building Regulations approval
This is in addition to all the paperwork you’ll usually need when applying for a mortgage, such as:
- Proof of identity and address
- Evidence of earnings
- Bank statements
Find the right broker
It could be very time-consuming and frustrating to apply directly to lenders, as only a minority of them will consider this type of application. It will be easier and quicker to work with a broker who knows this area of the market well.
Ideally, you’ll want to work with a broker who has previously succeeded in finding self-build mortgage deals for first-time buyers, as they’ll know exactly what lenders are looking for and what details to put into your application.
The brokers we work with have exactly this level of expertise and their advice can make a huge difference to the speed of the progress of your project.
If you get in touch we can arrange for a self-build mortgage specialist to contact you straight away.
Make your application
From here on, your broker will do the hard work. They will compare deals and eligibility requirements to make sure they’re getting you the best rate for your circumstances.
They will also negotiate directly with a lender to tailor your deal and manage your application through the entire process.
Eligibility requirements
There are some slight but important differences between the eligibility requirements for a self-build mortgage and any other type of first-time buyer mortgage.
Deposit
For self-build mortgages, the typical loan-to-value (LTV) available is 60-85% of the estimated final value of the property you’re building. This means you’ll need a deposit of 15-40%. That’s quite a lot higher than other types of first-time buyer mortgages, which you can usually get with a 5-10% deposit.
Loan size
Self-build projects tend to have lower lending caps than other residential mortgages. At the time of writing, around two-thirds of self-build mortgages had a maximum loan size of £1 million or lower (with the lowest being £400,000). If you’re looking to borrow more than £1 million, you’ll only have a handful of lenders to choose from.
Age
The standard minimum age to apply for a residential mortgage is 18 years. For most lenders, the same minimum age applies for self-build mortgages, but in several cases, a higher minimum age of 25 applies.
Income
As with other types of first-time buyer mortgage, the maximum you’ll be able to borrow for a self-build project is around 4-5 times the total income of all applicants. Because self-build mortgages are considered higher risk, lenders will be keen to see that you have a regular, reliable income.
Credit history
A high debt-to-income ratio or a poor credit history will not necessarily prevent you from getting a self-build mortgage, but it could make your application more difficult. A broker who specialises in bad credit mortgages can advise you and help you approach the right lender.
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Lenders and rates
The lenders who offer first-time buyer self-build mortgages include Halifax, Swansea Building Society, and The Melton Building Society.
Rates are typically a little higher than for standard residential mortgages due to the higher risk. At the time of writing (May 2023), available rates were in the range of 5-6%.
But, rather than apply to a lender directly, the shrewd move is to approach them via your broker. They will have all the up to date details of any new deals currently available, in some instances for offers not yet available to the wider public.
Things to consider
While there are plenty of reasons to be optimistic about fulfilling your dream of building your first home, there are some things you should consider before moving ahead with your plans.
- The cost of borrowing is higher for a self-build mortgage than a standard mortgage as both the rate and fees can be more expensive to counter the additional risk involved
- While building a home can be cheaper than buying one, it’s possible you’ll go over budget. You might then need to apply to extend your borrowing, often at a higher interest rate.
- Alternatively, if you finish the build ahead of schedule and want to remortgage to find a lower rate, you’ll usually need to pay a penalty fee.
- You will also need specialist insurance while you’re building the property, which is another added cost.
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Finding a self-build mortgage broker
Whatever your circumstance, when you’re getting a mortgage, it’s important to find a broker you trust. But if you’re both a first-time buyer and a self-build applicant, it’s crucial to find someone with exactly the right experience.
Our broker-matching service is based on details like these.
We’ll ask you about your situation, and then find the most appropriate match for you from the numerous brokers we work with.
If you’d like to be matched with an expert today for a free, no-obligation chat, just fill out our online form or call 0808 189 0463.
Ask A Quick Question
We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.
Pete Mugleston
Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
