Self Build Mortgages in Scotland

If you’re planning to build your dream home, a self-build mortgage may be the ideal form of finance.

In this article, we’ll investigate their availability in Scotland, whether there are location-specific considerations for those planning to build there, and how to find self-build lenders who serve this part of the UK.

Can you get a self-build mortgage in Scotland?

Yes, it’s perfectly possible. Although there are fewer Scottish-based lenders that offer this type of product, there are a number of lenders across the UK that will be happy to lend to those looking to build in Scotland.

How do they work?

Self-build mortgages work in exactly the same way, no matter where in the UK you plan to build your home, and you’ll usually need to have building experience, or hire a qualified building contractor, in order to qualify for this form of finance.

Funding is released in stages that correspond with key aspects of the building development, rather than all at once, and you will ordinarily need to provide a substantial project plan and costing documents prior to approval.

A few U.K lenders may cap the LTV (loan to value) rate at a slightly lower percentage for Scotland-based self-build projects, however, an experienced broker can guide you towards those providers who will fulfil your needs, whether you’re planning a small home in Edinburgh or a mansion on the Isle of Skye.

Do you need planning permission?

Wherever you plan to build your home, planning permission will need to be sought in advance of your self-build mortgage application, as lenders won’t give approval without it.

You’ll need to apply for planning permission through the relevant local council in Scotland, who will consider the following prior to approval:

• The building purpose (i.e residential use)
• Geographical availability of infrastructures, such as roads and utility supplies
• The architectural specifications, such as size and appearance of the property
• Landscaping and other potential environmental factors/requirements

Building Warrant

In Scotland you will also need to obtain a building warrant before the project commences; more information can be found here on the Scottish government website.

How a broker can help

Self-build mortgages are fairly niche, and criteria will vary substantially, so it’s crucial you find the right lender for your circumstances, especially if you’re planning to build in Scotland, where there are fewer lenders available.

An experienced broker with experience in securing self-builds for Scottish applicants will know which lenders are best to approach in any situation, for example, if you’re planning to build in the highlands, or outside of mainland Scotland.

The brokers we work with have access to every self-build lender on the market and can help you identify a deal to suit your needs.

If you get in touch we can arrange for a specialist advisor to contact you straight away.

Lenders and rates

Perhaps unsurprisingly, the vast majority of lenders in the self-build niche are building societies, rather than high street banks. Interest rates vary and are generally decided on a case-by-case basis, although typically they are higher than traditional mortgage rates. Current rates at the time of writing (May 2023) are between 5% and 6%.

Some lenders have geographical restrictions, for example, the Scottish Building Society only provides self-build mortgages for applicants looking to build a home in Scotland, whereas Progressive Building Society only accepts them for Northern Ireland.

Across the broader UK, the majority of self-build lenders only offer their products via approved intermediaries. Therefore, whilst some lenders south of the border may approve a self-build mortgage for a Scottish build, you’ll likely only be able to access them through a specialist broker.

Eligibility requirements

The eligibility criteria are similar to those you would expect for any other mortgage with regards to personal circumstances, for example:

• Age – Most lenders have a minimum and maximum applicant age
• Affordability – Some lenders have a minimum income requirement, and all will carry out affordability checks
• Credit score – A strong credit score can give you access to better rates and/or a higher loan, but it may be possible to secure a self-build mortgage with bad credit

Every lender will also expect you to have planning permission, and either personal experience of the house building process, or trusted contractors on hand.

Additional criteria vary between lenders and may include:

• Land ownership – Most lenders won’t include land purchase as part of the self-build finance, so you’ll need to already own land, or use another form of finance to purchase it
• Building purpose – Most lenders only provide self-build mortgages for residential properties, and usually, they also need to be a home intended for you or your immediate family
• Construction type – Some lenders only accept certain property types, for example, detached properties and others will not accept certain construction types, such as barn conversions or timber-framed properties
• Proof of qualifications –  You or your chosen contractors may need to show industry certification, such as an architects certificate and indemnity details alongside the project plans
• SAP rating  – A minimum SAP (Standard Operating Procedures) rating may be required by some lenders. This is a rating used by architects to ensure homes are designed to achieve a certain EPC (Energy Performance Certificate)

Are there alternatives?

Yes, there’s a few different options if this type of finance doesn’t quite fit with what you’re looking for or is unavailable, such as:

Get matched with an experienced self-build broker

Aside from helping you to overcome any geographical restrictions you may face in finding a suitable self-build mortgage, the experienced brokers we work with have a deep understanding of the home building process, through every stage of development.

This can be invaluable, especially if you’re taking on a project without prior building industry knowledge.

Our 5 star rated, free broker matching service will put you in touch with an expert who has plenty of experience in securing self-build mortgages for Scotland-based projects.

Simply contact us on 0808 189 0463 or complete the enquiry form.