Self-Build Mortgages

The hassle and hardship involved in building a house are enough to prevent most people from so much as entertaining the option of self-building.

Why bother building your next home when you could move into a ready-made one and save yourself a world of worry?

Such an objection is perfectly understandable, but there comes a point at which the financial incentives offered by the self-build option begin to offset the emotional costs it carries. Unbeknownst to many, that point may have already been reached.

Cost of a self-build

The National Custom and Self Build Association (NaCSBA) recently reported the cost of a self-build to be 15-20% less than that of buying a house outright. This estimate was backed up by another recent report which found that self-built homes are worth an average of 25-30% more on completion than they cost to build. Such figures attest to the present profitability of the self-build option; and there are additional realities at play that render this course of action even more appealing.

Stamp Duty

On a typical residential purchase, buyers pay stamp duty on the entire cost of their new home. When building a new property, however, they only pay stamp duty on the cost of the land they’ve purchased; they pay nothing on the value of the house once it is eventually constructed. In the past – even just twenty years ago – this may not have provided much cause for serious consideration, but today stamp duty rates are so high as to factor significantly into any house-related decision-making process. The difference between paying full stamp duty and paying none is likely to amount to thousands of pounds.

House Prices

In addition to this, Lloyds have just released data suggesting that city house price growth since 2013 has outpaced earnings growth by 11%, causing home affordability to hit its lowest point since 2007. These findings were born out by a recent survey conducted by glazing manufacturer Thomas Sanderson, which revealed that only one in six homeowners who bought their home within the past five years were content with their living situation. Furthermore, the survey also found that only half of all people to buy a house within the past five years got the home they actually wanted. As this shows, housing satisfaction is at a low point; if homebuyers wish to purchase houses that meet all of their requirements – an increasingly difficult task – they may need to begin considering alternative options. One such option is the self-build.

How much can actually be saved?

All of this is good and well, but it’s hard to convey the full extent of the savings that are there to be made without illustrating this fact with some cold hard numbers. Consider the following example: If you choose to purchase a plot of land for £125,000, you will pay no stamp duty at all. Assuming you then go on to spend £300,000 building your house, the total cost of your build will be £425,000. Taking the numbers provided by the NaCSBA, then, the property you build could have a market value of up to £531,250. If, on the other hand, a house of this value was purchased on the market, the stamp duty it would generate would be £16,562, driving the total cost of the move up to £547,812. This means that if you buy a plot of land for £125,000 and you spend £300,000 in construction costs, you could save a colossal £122,812 by choosing to build your own home. That’s a saving of 22% – surely a large enough figure to warrant serious consideration.

As has just been demonstrated, the amount of money that is there to be saved – and made – when building a house is huge. But there’s no denying the stress that comes with such a project. One such source of stress is likely to be your mortgage. Arranging a mortgage for a new home can be a daunting enough prospect without the added complications that come with self-building. Mortgages of this type are often released in stages that correspond with the various stages of a build. If your mortgage is not arranged correctly, the timings of these stages can become disjointed, producing cash-flow problems that will drive costs up and extend the duration of your build significantly.

Private Finance’s expert advisers are well acquainted with the complexities and potential pitfalls surrounding such mortgages. Should you choose to go down this route, they will be able to guide you through this process with as little unnecessary hassle as is possible.

Private Finance’s Guide to Self-Build Mortgages

Access our official guide to self-build mortgages where we provide you with everything you need to know to arrange the right mortgage for your building project:

  • Overview of self-build mortgages
  • How does the funding work for a self-build mortgage?
  • How to apply for a self-build mortgage?
  • Benefits and disadvantages of self-build
  • Our top tips for prospective self-builders

Take me to the guide ⇒

If you would like to discuss the possibilities of such mortgages with one of our experts, you can get in touch by emailing us at or calling on 02073172820. 


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