Find out what self-build mortgages are, how they work, how they’re different to regular mortgages and how to get one in the UK in 2025.

In this article we cover:

• What is a self-build mortgage and how it differs from a regular mortgage
• How much you can borrow for a mortgage in the UK in 2025
• What stage your project needs to be at to qualify for a self-build mortgage
• How much of a deposit you need and whether land can be put up as a deposit
• How expensive are self-build mortgages?
• Do all lenders offer self-build mortgages?
• What documents you need to apply
• How the stage payments work with self-build mortgages
• What the disadvantages are

A self-build mortgage will help you get the funds to get started building your home. However, they are quite different to a standard mortgage. Here’s what you need to know.

What are self-build mortgages?

A self-build mortgage differs from a standard mortgage in that the lender releases funds in stages as your home is being built, rather than as a single lump sum.

With a traditional mortgage, the loan is based on the completed property’s value and is only provided at the end of the purchase. Since most builders expect payments throughout the project, this setup wouldn’t work for a self-build.

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Because funds are drawn down in phases, you only pay interest on the amount released so far, not the full mortgage sum.

This staged approach also protects lenders by ensuring each payment matches the property’s value at that stage, reducing the risk if the project runs into trouble.

How much can I borrow?

In the UK, lenders typically offer up to 75 per cent of the project’s total costs or the expected end value of the property. For instance, if your completed home is expected to be worth £500k, you might be able to borrow up to £375k.

If you already own the land you are building on some lenders may consider this as additional security, potentially allowing you to borrow up to 100 per cent of the construction costs, subject to the final loan to value.

The amount you can borrow is also influenced by your income, with lenders typically offering loans up to 4.5 times your annual income.

The UK government’s Help to Build scheme provides 5 to 20 per cent of the total estimated cost of land and construction (up to 40 per cent in London), in return for an equity stake in your home.

What do I need before applying for a self-build mortgage?

Before applying for a self-build mortgage, you will need two things. First you will need to find a site to build you property. Then you will need to get planning permission for the house you plan to build on that site.

Note that lenders will not give you the funds until you’ve obtained planning permission. They will also not help fund the cost of getting planning permission.

How much of a deposit do I need for my self-build mortgage?

Most lenders expect a deposit of at least 25 per cent of the total, although the Help to Build scheme may provide a government equity loan for up to 20 per cent of the deposit if you qualify,

However, many lenders allow you to use the site as a deposit if you already own it.

If someone gifts you the site, it can count toward your deposit. For example, if the site is worth more than 10% of the combined build and site cost, you can borrow 100% for your build.

How expensive is a self-build mortgage?

Building your own home often works out cheaper in the long run, which can lead to a better loan-to-value ratio — usually resulting in a lower mortgage rate.

However, self-build mortgage rates tend to be higher than standard mortgages because lenders see them as a greater risk.

The key difference is that with a self-build mortgage, the bank releases funds in stages as construction progresses rather than providing the full amount upfront.

Do all lenders offer self-build mortgages?

Once you have a site and planning permission, you can start your self-build mortgage application.

Not all lenders offer self-build mortgages. Many high-street banks and mainstream lenders don’t provide them due to the added risk and complexity involved.

Specialist lenders, building societies and a few major banks typically offer self-build mortgages with specific self-build products.

Talk to a mortgage broker to help you choose which lender is best for your particular build.

What do I need to apply?

To apply for a self-build mortgage in the UK, you’ll typically need the following:

Planning permission: You’ll need proof that you have planning permission for your self-build project, which is often needed by lenders before they approve the mortgage.

Detailed plans and budget: Lenders will expect a comprehensive set of plans (including architectural drawings) and a detailed budget for the construction, which should outline all expected costs.

Project timeline: A timeline for the completion of the self-build project, including stages of development, is important to show the lender you have a clear plan in place.

Land ownership: Evidence that you own or have access to the land where the self-build project will take place. If you’re buying land for the project, you’ll need to demonstrate how the purchase fits into your financing plan.

Income and credit history: As with any mortgage application, lenders will look at your income, credit score and financial stability. They’ll want to see that you can afford both the mortgage repayments and the costs associated with the build.

Deposit: You will likely need a deposit, usually around 25% of the overall project cost or the land value (whichever is higher).

Proof of builders and contractors: Builders and contractors must provide accurate timelines and cost estimates to keep your project on track. You may need to show that the people involved are qualified and experienced in self-build projects.

Valuation of the finished property: A lender typically arranges an independent valuation of the property upon completion to estimate its market value.

Once you have these documents in order, you will get an initial offer from a lender. To get your loan approved, you must ensure your building plans and cost estimates are realistic. If your cost per square metre is too low or there is insufficient contingency, then the lender will almost certainly not approve the loan. So if you are planning to cut any corner, it is easy to come a cropper here and not get the funds you need.

How do the stage payments work?

After approving your self-build mortgage, the lender will begin releasing funds corresponding to each stage of your build.

There are generally four to six stages depending on your build, which can include:

• Land purchase
• Foundation completion
• Wall plate level
• Roof completion
• First fix (plastering)
• Final completion

The lender typically spreads these stage payments over 18 months, depending on the length of your building period.

At the completion of each stage, lenders will seek proof that the build has reached a certain level before releasing the next tranche of funds.

At each stage above, the architect, as your assigned certifier, will send a certification of completion to your solicitor, who in turn sends this to your lender.

Once the lender receives the certification, they will release the funds for the relevant stage.

Usually, you won’t need an independent valuer to visit the property at interim stages, but they typically assess it at the point of certified completion.

This process requires a lot of paperwork and can significantly slow your build if you don’t stay on top of what you need at each stage.

It is possible to get funds in advance of each stage of the build rather than in arrears, but you will pay extra interest for the privilege.

What are the disadvantages to a self-build mortgage?

Financing your home takes much more time and effort than financing a mortgage for an already built home. It also requires a serious amount of planning and can be a very long process.

You have to plan out all aspects of the build such as finding an architect, getting planning permission, finding a site, finding a mortgage etc.

Building your own home comes with some risks, such as construction taking longer than expected or exceeding the budget. If you are up to your maximum lending amount, this can become a significant issue.

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