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Self-build mortgage

What you need to know about a self-build mortgage

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  • Planning to build your own home? You'll need a self-build mortgage

  • Our partner Fluent can help you find the right mortgage for your self-build project

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What is a self-build mortgage?

A self-build mortgage is a loan you take out to fund a property you are building yourself.

The main difference from a standard residential mortgage is that you receive the funds in stages as parts of the build are finished, rather than as a single lump sum. This is to reduce the lender's risk and ensure that the money is spent as planned. This way, you won't run out of cash when you’re only halfway through the project.

Exactly when funds are released depends on the lender. However, you'll typically receive the first payment when you buy the land. You’ll then receive more when the foundations are laid and a further payment when the property is built up to eaves level.

Later payments are normally made when the roof is watertight and the interior walls are plastered. The last instalment is paid on completion.

Self-build mortgages can be a good bet for first-time buyers looking for a more affordable way to get onto the housing ladder.

What types of self-build mortgages are available?

There are two types of self-build mortgages:

  • Arrears: This is the more common type. Payments are handed out after each stage of the build is completed. This type of mortgage is better for people who have a lot of cash on hand to help pay for the project

  • Advance: Payments are released at the beginning of each stage, making money available when the bills for labour and materials are due. This removes the need for bridging loans or other short-term borrowing. This type of mortgage helps with cashflow and is better for people who have less money on hand to fund their projects. Bear in mind, though, that fewer lenders are prepared to offer this kind of mortgage

Interest rates on self-build mortgages are normally higher than on standard mortgages.

Please note that MoneySuperMarket does not currently compare self-build mortgages.

What are the advantages of a self-build mortgage?

  • Save money on stamp duty

    Stamp duty isn’t levied on the cost of building work or the value of the property once the work has been completed. You only have to pay duty on the value of the land itself and only then if the cost exceeds £125,000

  • Might work out cheaper if you plan well

    If you plan properly, you may be able to cut costs overall. In fact, by picking the material and labour yourself, you might spend less than what you would if you bought a ready-made home

  • Higher property value

    Another advantage is that self-builders also often find that the value of the finished property is significantly higher than the cost of the land, the materials, and the labour put together

What are the disadvantages of a self-build mortgage?

  • Risk of losing money

    Yes, a self-build mortgage may indeed work out cheaper than other solutions. But it’s also true that if things don’t go to plan or you’re not able to stick to your plan, you could end up losing finances and financing

  • Large deposits and higher interest rates

    Generally, lenders offering a self-build mortgage will ask for a larger deposit, which could be up to 50% (if not more). What’s more, interest rates and fees are likely to be higher than traditional mortgages

  • Can be a time-consuming project

    Finding the right piece of land and sourcing the architects, builders, and materials for a self-build home can be a lengthy, time-consuming process. Therefore, you will need patience and the desire to manage many different aspects

How are funds released with a self-build mortgage?

The release of funds for a self-build mortgage is different from a standard mortgage, when money is released on completion of the buying process.

With self-build mortgages, stage payments are made, meaning that a lender will pay out a set amount at a specific point as your build progresses. If you are building your own property from scratch, then it’s most likely you’ll receive upfront mortgage payments at the following points in the build:

  • Purchase of the land (with proof of planning permission and, depending on the lender, drawings from a qualified architect)

  • Laying of the foundations

  • Construction of the property to eaves height, ahead of the roof going on

  • Roof complete and property wind and water tight

  • First fix

  • Second fix

  • Confirmation of property’s completion via a completion certificate

How fund-release differs for arrears and advance self-build

If you have an arrears self-build mortgage you will receive mortgage payments when the work is complete at each stage.

If you have an advance self-build mortgage, funds will arrive ahead of each stage, meaning you can pay contractors and suppliers quickly.

If you are self-building in a group, or using a custom-build method, the release of funds differs slightly, with the eaves height stage usually not included in the terms of this kind of self-build mortgage.

To be sure, speak directly with your lender for exact details

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Can I change to a normal mortgage once the build is complete?

In most cases, it is possible to remortgage once your self-build is complete and certified by a surveyor.

To do so, you’ll need to have it valued and the property must be habitable. Your mortgage lender or building society will then offer you a regular residential mortgage, based on a more affordable interest rate.

If you want to remortgage, it is vital you check if there are any early repayment fees for leaving your existing deal. A mortgage advisor is essential if you want to make a new mortgage application, as they will be able to help you find the best deals available.

Can I get a mortgage for just land?

While some specialist lenders will offer mortgages just for land, you will need a large deposit, sometimes as much as 50%. This approach may work if you already have a large amount of capital for both a deposit and the building works.

However, lenders are likely to require proof of planning permission. Self-build mortgages tend to be more affordable when it comes to the deposit required, as well as being easier to come by, with more lenders offering such deals.

Read our guide to loan-to-value to learn more.

Compare mortgage options with MoneySuperMarket

Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.

Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.

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Reviewed on 24 Jun 2026 by

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Ashton Berkhauer

General Manager • Commercial

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