Getting a Self-Build Mortgage on Land You Already Own

Looking to develop a plot of land you already own? Great! By owning the land you’re already halfway there, but you’ll likely still need a mortgage to fund the build. That’s where self-build mortgages come in.

This guide will tell you everything you need to know about getting a self-build mortgage when you already own the land and how a broker can help you identify the right lenders for this type of borrowing.

Can you get a self-build mortgage on land you already own?

Yes, you can! A self-build mortgage can offer the funds necessary to build your new home, and because you already own the land – and therefore won’t need to fund this purchase as well – you’ll probably need to borrow less, which can work out far cheaper in the long run.

How does it work?

Self-build mortgages work a little differently to conventional deals in that you’re not given the full amount in one go.

Rather, the funds will be released in stages, either on an advance or arrears basis:

• An advance mortgage means you’ll be given the funds at the start of each build stage, so you won’t need to use your own money to cover the cost.
• An arrears mortgage releases funds when each stage is completed, which means you’ll need to pay for any materials, labour and related costs out of your own pocket.

Arrears mortgages are more common, and for this reason it’s vital to have funds of your own to begin your project. Yet the fact you already own the land can be used to your advantage.

Not only does it mean you skip the first stage of development (which is normally buying the plot), but you may be able to remortgage the land in order to raise finance to cover the initial build costs, making an arrears mortgage more palatable.

Either way, self-build mortgages are niche products and it can be difficult to know where to start. Rates can be much higher than for conventional mortgages too, though once the build is complete you’ll normally be able to remortgage to a traditional deal at a lower rate.

The complex nature of these deals means it’s always best to speak to a broker who specialises in this area.

Can you use land as a deposit for a mortgage?

Most lenders will expect you to have your own savings to put down as a deposit and to use for the initial build costs. However, if you already own the land, there’s a chance you’ll be able to use it as collateral, and some lenders will consider the value of the site as part of your equity.

Plus, if you’re getting a mortgage for land with planning permission you may find you’re able to borrow more, as planning permission increases the value.

How a broker can help

A broker will be able to help in two key ways:

• They’ll help you identify the best lenders to approach. Relatively few lenders offer self-build mortgages, but a broker who’s experienced in the sector will know exactly who they are, saving you the time and hassle of going it alone. Crucially, they’ll know each lender’s criteria as well, and will be able to help you source the product that perfectly suits your build’s requirements at the best rate possible.
• They’ll help you put together your application. The complexity of this kind of application means having someone who knows the steps can be invaluable. They’ll work with you throughout the process, helping you collate the additional documentary evidence needed for this kind of mortgage – such as proof of land ownership, planning permission and build cost estimates – ultimately ensuring you stand the best possible chance of being approved.

We work with advisors who are experts in the self-build sector and can help take your development to the next level.

Get in touch and we can arrange for a broker to contact you straight away.

Eligibility criteria

Getting a self-build mortgage when you already own land can often be simpler than if you needed to fund the plot as well, but they’re still very different to conventional mortgages and come with additional eligibility criteria.

• Planning permission. Getting a mortgage for land with planning permission will be much easier than without, so make sure to secure it as a first step. Some lenders may only expect outline consent planning permission when you apply, but you’ll likely need detailed planning permission in place before any funds will be released.
• Plans and costs. You’ll need to provide a copy of the architectural plans for the development and a breakdown of the build costs. This shows the lender that you’re fully prepared for what’s in store and will give them confidence they’ll get their money back.
• Construction type. It will be easier to source a self-build mortgage if your project is of standard construction. Non-standard developments will be tricky to fund, but not impossible; it just means you’d be best to speak to a specialist broker for help.
• Indemnities. You may be required to show additional indemnities or warranties before you’ll be approved for a mortgage, including architect’s certificates and indemnity details.

Alternative options

While a self-build mortgage is arguably the most common method of developing a plot of land you already own, it’s by no means the only option.

A few alternatives include:

• Remortgaging an existing property. Releasing some of the equity in an existing property could be a viable way to secure a cash lump sum that could fund the build of your new home.
• Use the land. Owning the land gives you plenty of potential, and you may be able to simply remortgage the land itself and use the proceeds to build the property, or take out a land equity loan (though such loans are more typically used for other purposes).
• Bridging finance. This is a short-term form of property finance that can be useful for the initial stages of a build, though is more common if you’re developing the land commercially.
• Construction mortgages. Another form of short-term commercial finance that can be useful in certain development scenarios.
• Traditional loan. If you only need to borrow a relatively small amount, you could go down the route of seeking a standard personal loan.
• Help to Build. Help to Build is a government scheme that offers an equity loan of between 5% and 20% of the estimated build cost, provided you meet the criteria. You’ll still need a self-build mortgage alongside it, but it could offer valuable additional funding if you don’t have much in the way of savings yourself.

Find an expert in self-build mortgages

Speaking with a broker who’s an expert in self-build mortgages is essential if you want to successfully navigate such a complex sector, and our unique broker matching service can put you in touch with the advisor to help.

Just fill in this form or call us on 0808 189 0463 for a free, no-obligation chat, and we’ll scour our network to find the broker who’s perfectly matched to your needs.