Extreme DIY: Getting a mortgage for a self-build

Why not turn your dream of having the perfect home into reality? Building your own home affords you a host of advantages, as our latest article explains.


  • Building your own home offers a host of advantages, including the opportunity to realise your own vision and have your dream house in the perfect location.
  • The average self-builder spends £27,000 on their build, making this a cost-efficient option.1
  • Your Wellesley adviser can guide you through the self-build mortgage market and put you in touch with a company that will handle the entire project for you.

Grand designs

The various lockdowns of the past 18 months saw DIY stores enjoy a veritable sales boom, as homeowners made use of their increased downtime with improvement projects. As the latest restrictions are easing up all the more, you may be contemplating turning your hand to a more ambitious DIY project – namely, building your own house from scratch.

Attempting a self-build might sound like a pipe dream. But nowadays it’s easier than you might expect, according to Paul Johnson, Chartered Financial Planner and Head of Mortgages at St. James’s Place Wealth Management.

“About 20 years ago, it was hard. But today there are so many companies that can help you with it. There’s a misconception it’s difficult to get finance, but there are at least 20 lenders out there that will lend on self-build.”

Diversity in DIY

The benefits of building your own home are numerous. The biggest attraction is no doubt the level of choice and control it offers, with the opportunity to realise your own vision without the limitations of what’s currently on the market. As Johnson notes, those who have moved several times and are looking at their next home often have certain preferences and requirements.

“There’s always something that’s not right. Maybe the houses they’re looking at aren’t in the right location. Or they’re in the wrong style. So, they want to work from a clean sheet – where they choose the area and build the property to their own specification.”

Eco-friendly self-builds are also increasingly popular with people wanting to ensure as energy-efficient a home as possible. This could result in a potential cost advantage, with a growing number of lenders offering ‘green’ mortgages – in other words, lower interest charges on more energy-efficient properties.

Johnsons goes on to say that it’s becoming easier to secure planning permission in certain areas, too, with local authorities being more flexible and accommodating as regards converting vacant ex-commercial space.

He adds that, while some people wish to tackle their own self-build project and manage the entire process, others would prefer to step back. Ultimately, it’s your decision as to how involved you want to be.

“We can introduce you to someone who can take the stress of the project off you – from the building process to the finance. Or, if you prefer to get stuck in, we can simply advise you on the lending and help prevent you from running out of money before the end of the process.”

However you decide to approach it, it’s crucial to seek advice from the very start. Johnson says:

“Don’t just dive into it. Step one is to talk to a mortgage adviser before you start looking at land, getting a builder and putting plans in place.”

It’s particularly important to have an understanding of what it’ll cost, whether you can afford it and the type of lending you’ll need in place.

Do the math

Taking the self-build approach could turn out to be both cost-efficient and potentially cheaper than buying a new home. Research indicates that the average self-builder spends approximately £270,000 on completing their project, with the cost of the plot averaging out at £190,000.1

But at the start of the project, it can be all too easy to underestimate the various costs, while getting a good grasp of the self-build mortgage market is much easier with professional advice.

High-street banks tend to avoid lending on self-builds, so the best option is usually one of several building societies who specialise in this area, such as Skipton, Leeds, Ecology and Furness.

There are also fundamental mortgage differences to be mindful of – traditional mortgages provide the finance in one go, while self-build loans are generally released in tranches.

“They release the money as you go through, but every lender is different in how they do it,” comments Johnson. “They typically start providing funding for the land, but not all of them will.”

The underlying reason for this is to protect lenders and mitigate the risk of funds running out during construction. But this arrangement can become convoluted for borrowers

when phases are delayed or costs start to surge.

The application process is similar to that for standard mortgages. Lenders will, however, want to see the planning permission, otherwise, the focus is mostly on affordability and income.

To conclude, Johnsons says that building your own home is far from being a pipe dream – provided you get good advice.

“Talk to a mortgage adviser. You might be surprised at what you can do, and it’s often a very logical step. Why look at second best or compromise when you’ve got your own vision and you know what you want?” 

Your home may be repossessed if you do not keep up repayments on your mortgage.



Homebuilding & Renovating, Self & Custom Build Market Report, 2020

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