I'm planning on building a home - what are my mortgage options?

Programmes such as Grand Designs have inspired thousands of Britons to build their own homes.

The advantages of planning and building a home yourself are obvious - you can choose the layout, the location and - in many cases - save up to a third on the price of a similar ready-built property.

But whether your dream property is an isolated eco lodge or a red brick townhouse, few of us have the funds to finance the project without taking out a mortgage. However, for most of us some kind of mortgage finance is a must.

You won't qualify for a standard residential mortgage but a number of lenders offer self-build loans. Fewer lenders operate in this market however, so the choice of products is more limited and because there is less competition, rates are less keenly priced.

How do self-build mortgages differ?

The main difference between self-build and standard residential mortgages is that the funds are released in stages rather than as a single lump sum. This is to minimise the lender's risk and ensure that the money is spent as planned so that you don't run out part way through the project.

The exact timings of when money is released will depend on the lender but the typical stages are:

• Purchase of the land
• Laying of the foundations
• Built up to eaves level
• When the roof is water tight
• When the interior walls are plastered
• Completion

The proportion of the total loan that is released at each stage will vary from lender to lender.

Will I qualify?

Taking out a self-build mortgage is generally more complicated and involves more paperwork than a traditional mortgage application.

You will, for example, be required to produce detailed plans for the property, as well as a projection of the costs involved. Most lenders will also expect you to have already had the appropriate planning permissions agreed.

You will need a deposit of at least 25% although some deals require as much as 50% to be put down.

Other issues to consider include that you will need enough money set aside, on top of the deposit required by your lender and any mortgage fees, to pay for accommodation while your new home is being built.