How to arrange a mortgage for an environmentally responsible self build

Finding the right mortgage is a crucial part of any self build plan, it can have a big impact on the success of your project and how smoothly the build runs. Self build mortgages work a little differently to a traditional mortgage. Instead of getting all the funds you need upfront, the lender will release the full amount in several stages to fund the progress of your project

To find out more, and how building responsibly can also impact the types of lenders available to you, we spoke to Tom McSherry, National Relationship Manager at Buildstore. Tom has worked in the financial services industry for over 25 years and has spent the last 12 of these specialising in self build mortgages at BuildStore. He has provided expert advice to hundreds of customers embarking on major homebuilding projects and is widely regarded as a self-build finance expert.

What type of Mortgages are available for someone looking to self-build?

There are two main types of self-build mortgages, each defined by when you receive the funds at each stage.

1. The traditional arears mortgage, where funds are released after each key stage of the build.

2. Buildstore’s unique ‘accelerator’ mortgage, where funds are released before each stage of the build providing a positive cash flow.

What’s the difference between environmentally responsible and passive house builds when it comes to lenders?

The key difference is the formal certification of the project upon completion of the build. However, this is not a requirement for most lenders. The appropriate certification of materials, a suitable 10-year warranty and the quality of the build are the focus for many lenders. However, It is important at an early stage to take advice in relation to your chosen building system. This is particularly important for the external cladding being utilised, as this could have an impact on the number of lenders available.

What will lenders look for on environmentally responsible builds?

All lenders will require builds to meet building regulation standards, however most self-builders will look to far exceed these levels of build quality. Each lender will look to have detailed build costs, along with plans showing the materials and superstructure system selected as part of the application process. The costings documents and builders quote will highlight the products and materials that are environmentally responsible such as solar thermal, ground source heat pumps, and mechanical heat recovery systems.

Is there a range of lenders available for environmentally responsible builds? (See attached table)*

Yes, all self build lenders will be happy to support environmentally responsible builds, with off-site production increasing in popularity. As highlighted above the superstructure, external cladding and choice of roofing materials could either increase or decrease the lender choice available, so early advice at the design stage is very important.

Before making an application what things do I need to have in place?

A self build mortgage will require the usual documentation needed for a regular mortgage, such as pay slips, accounts, proof of address and proof of identification. In addition, the lender will also look to understand the build with key information such as build costs, planning permission, builder’s quotes, architects drawings, details of the anticipated build period, superstructure system information and the external cladding system selected. This list might seem extensive, however, with the support of a specialist broker like Buildstore you will have you hand held through the process from start to finish.

How long will it take to arrange a self-build mortgage?

On average it will take between 2-3 months. The process needs to be thorough to ensure that you cannot only borrow what is sufficient to complete your build, but can also ensure that the lender and product provides the funds at the right time to pay your suppliers and trades people. As well as the usual mortgage application requirements, it’s important to check that the costings are responsible and that these fit into the planned stages of the build. Many of the self-build lenders are building societies and have a manual underwriting process along with the requirement for a detailed valuation and the usual legal process. Remember that the mortgage will be delivering the funds for your dream home, so it should not be rushed.

Lenders supporting environmentally self builds *

*Data supplied by BuildStore and correct at date of publishing (12/09/2017)