How to Finance a Self-Build Project: Different Methods Available

As with any project you’ll take on in your life, a self-build property can be funded in a few different ways. However, it’s important that you do the research and weigh up the pros and cons of different methods before settling with one. Deciding to undertake a self-build project is a huge commitment, although it is extremely rewarding to see the finished product! That being said, we want to ensure that you have all the tools you need to choose the most effective method of financing the project. Essentially, your current financial situation and future plans will be the main points of consideration.

Here are the different ways you can finance a self-build project:

Use your savings for a cash purchase

If you’re are fortunate enough to have a big chunk of money saved away, this can be one of the most effective and easiest ways to finance your self-build! Investing in property is a great move and if you’ve got the money already, it’s a no-brainer. You may also want to combine this type of finance with another e.g. a mortgage or a loan from friends or family.

Loan from friends or family

You may find that you need to top up your savings with a loan from friends and family. In some circumstances, you may be able to borrow the entire amount you need from a loved one. This is a really great opportunity as you won’t be tied to interest rates like you would be with a bank loan or mortgage. Hopefully, you can come to a suitable arrangement with the friend or relative lending you the money.

Apply for a self-build mortgage (deposit required)

Did you know that specific mortgages for self-build projects exist? They aren’t as readily available as standard mortgages but generally operate the same. The only difference is self-build mortgages are released in stages as the project progresses. This is because there is nothing for the bank to lend against, so it’s seen as more of a risk to give the full amount. As each stage of the project is reached, there becomes more physical property to invest in. Typically, you’ll receive the initial portion of the mortgage to purchase land. The following stages vary between providers but usually look like:

  • Initial costs and foundations
  • Timber frame or wall plate erected
  • Wind and watertight stage
  • Fix and plastering
  • Second fix, completion

For a list of self-build mortgage providers, head to the BuildIt website here.

Sell your current home to fund the project

Of course, this method will only work if you currently own a property and your self-build will be your new residence. And obviously, you’ll need somewhere to live/stay during the process. However, this can be an effective way to finance your self-build project as you might not need to actually raise any extra cash – depending on the value of your home compared to the cost of the self-build project. But you should consider this isn’t going to be as smooth as selling your home and moving into an existing new home. Your self-build project may take longer than you initially expected and extra costs may be incurred. We recommend you choose a company that will be transparent about costs and timings, as well as finding somewhere to live in the meantime!

The bottom line

In conclusion, you’ll need to weigh up all of the above options and see which one suits your lifestyle, plan and circumstances the best. Realistically, you may need to combine some of the options for the most effective way of financing your self-build project. It’s also worth knowing that you are exempt from paying Community Infrastructure Levy when self-building. This is a tax that is usually charged with planning permission for a new house.

Don’t be afraid to get in touch with us today, we offer free and impartial advice for any prospective self-builders! You can call us on 01829 730244 or email at enquiries@cbhomes.co.uk.

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