How Do Self Build Mortgages Scotland Work? | Bespoke Home Finance

self build mortgages scotland

The idea of building your own home can be very exciting as you can finally design an ideal environment for you and your family instead of buying an existing property. 

Many people tend to think that having the option to pick out the size, decor, fixtures, and every detail of your home when building it yourself is more costly when in reality it can actually save you money in comparison to buying a property.

However, building your own home is not necessarily hassle-free. There are quite a few hurdles to overcome such as how you are going to pay for it. If you are choosing to build your own home, a conventional mortgage will most likely not be suitable for you, but a self build mortgages Scotland would.

What are self build mortgages Scotland?

Self build mortgages Scotland offer a finance structure that creates the cash flow needed for building a home for those who cannot afford to finance the entire build on their own. Self build mortgages Scotland gives you the opportunity to buy the plot of land you want to build on as well as finance the actual build of the property itself. 

Unlike conventional mortgages, where funds are released in one lump sum upon completion, self build mortgages Scotland release funds in stages as different parts of the project are being completed. This is typically done to minimise the risk for lenders who want to ensure that they do not lend more than the project is worth.

The stages of self build mortgages Scotland 

There are a number of exceptional timber frame design, manufacture and installation companies around Scotland that specialise in social and private new build housing developments for those looking to build in the area. Every self build mortgages Scotland project has clear stages from the beginning phases of construction to the final touches. 

The typical stage payment for a structural timber frame construction is as follows: 

Stage 1: purchase of land.

Stage 2: preliminary costs and foundations.

Stage 3: timber frame kit erected.

Stage 4: wind and watertight.

Stage 5: first fix and plastering.

Stage 6: second fix to completion.

Types of self build mortgages Scotland

There are two main types of self build mortgages Scotland:

Arrears stage payments

This is where the self build mortgages Scotland payment is released to you in arrears i.e. as every stage is completed. Money is released after a valuer visits the property during every stage, so the lender does not lend more than the property is currently worth.

Majority of lenders are willing to offer this kind of self build mortgages Scotland, but you will need to be able to cover the costs of materials and labour upfront before being reimbursed. Arrears stage payments are ideal for those with savings or access to cash to fund the various building stages. If you don’t have sufficient cash to hand, you can use bridging loans to cover the costs in advance and then repay these with funds from the self build mortgages Scotland.

It’s important to note that stage payments are not 100% guaranteed and depend on the valuations of the property. 

Advance stage payments

With advance stage payments, the lender will release payments at the start of each building stage, prior to work commencing. This allows you to pay for the costs of materials and labours using the funds. Stage payments are 100% guaranteed with this method and are based on your project costs, irrespective of valuations carried out during the various stages of construction.

This is a great option for those who do not have plenty of savings. This leaves you in a cash positive position and in more control during the building process. Advance stage payments are also ideal for those seeking an off-site manufactured construction method such as structural timber frames where you may need to pay in full before installation. 

Furthermore, you’ll only need a 5% deposit to get your project started. However, fewer lenders offer advance stage payment self build mortgages Scotland due to the risks. 

How to get self build mortgages Scotland?

Lenders tend to be incredibly cautious when it comes to self build mortgages Scotland. Qualifying requirements for a self build mortgages Scotland are dependent on the individual mortgage lender. 

To improve your chances of being granted a self build mortgages Scotland, you will need to show lenders that you have planned your project carefully and have considered every detail during each stage of the building process. Some of the things you should put together (including documentation) are as follows:

  • Planning permission.
  • Detailed projections of costs and timescales.
  • Risk assessments and contingency plans.
  • Architectural drawings such as a detailed map of the site and floor plans. 
  • Building regulations approval.

We recommend that you build a minimum of 20% contingency into your build cost estimate. 

Moreover, where you intend to live whilst the construction is being carried out will also be considered. If you already currently have a mortgage or pay rent, that will affect your affordability calculations. A good credit history, large deposit and proof of reliable income will be advantageous and increase your chances of being granted a self build mortgages Scotland, even if it is your first time building a property.

Advice from Bespoke Home Finance

Self build mortgages Scotland can give you the financing you need to make that dream home your reality. Enlisting a skilled mortgage advisor truly makes a difference when it comes to dealing with niche lenders and getting the best rates. 

Contact us today on 03301112477 or fill in a contact form to achieve the best self build mortgages Scotland. 

If you’re not sure that self build mortgages Scotland is the right fit for you, there are several other options available. 

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