BuildStore Mortgage Services’ Tom McSherry tells The Selfbuilder’s James Parker how self-build mortgages work, the options available, and why early financial planning is key to a successful project.
What are the different types of self-build mortgages on offer, and how do they differ from conventional mortgages?
A self-build mortgage is designed to release funds in stages, rather than as one lump sum at the start, to match the way building projects incur costs. There are two main types:
Arrears Valuation Stage Payments Funds are released after each stage of work is completed and signed off by a valuer. This suits borrowers who have significant savings and already own the site. It is important to understand that if the value does not increase in line with the spend, you could incur cash flow issues.
The other is Arrears Stage Payments Guaranteed. Unlike the valuation based arrears products, these mortgages guarantee you the funds after each stage of the project, reducing risk and creating the certainty of you receiving the funds you need.
Advance Stage Payments Guaranteed unds are released at the start of each stage, based on your build costs, not the value of the property at that point. This provides certainty and better cash flow, particularly for those without large savings or looking to use offsite manufactured building systems.
This differs from a conventional mortgage, where funds are released in full at completion of the purchase. Self-build mortgages are tailored to the unique cashflow demands of building a home from scratch or undertaking major works.
What are guaranteed stage payments, and how do they work?
Guaranteed stage payments, available through BuildStore’s exclusive arrears and advance payment products, mean your funds are released on pre-agreed dates and amounts, aligned with your build schedule. This is based on your project’s estimated costs, rather than the value of the property at each stage. The benefits are significant:
- Cashflow certainty – you know exactly when and how much money will be available.
- Reduced reliance on savings – ideal for those without large sums to cover upfront costs.
- Fewer delays – contractors can be paid promptly, avoiding costly stoppages.
What criteria do self-builders need to meet to qualify for a self-build mortgage?
While requirements vary by lender, common criteria include:
- Deposit – usually at least 15% of the total project cost; however, BuildStore has products with as little as a 5% deposit required.
- Detailed plans and budget – lenders want to see accurate costings and a realistic schedule.
- Planning permission – outline planning consent is typically needed before funds are released to purchase the land, with detailed planning required to release funds to start the build.
- Good credit profile – similar to a conventional mortgage, affordability and credit checks apply.
Why is it so important to speak with a mortgage specialist early on in the process?
Engaging with a specialist like BuildStore early ensures you:
- Choose the right product for your cashflow and project type.
- Understand your budget before committing to land or build costs.
- Avoid funding gaps that can halt progress mid-project.
- Navigate lender requirements so your application proceeds smoothly.
Many self-builders waste time and money because they seek finance too late. Early advice can help shape your project to meet lender criteria from the start.
Can I use this type of financing for a refurbishment project or extension?
Yes. While self-build finance is often associated with building from scratch, it can also fund:
- Major renovations
- Buying an uninhabitable property for renovation
- Barn conversions
- Property reconfigurations
- Property extensions
As with self-builds, funds are released in stages, supporting projects where costs are spread over time and work increases the property’s value or size.
How can a mortgage provider help with managing potential unexpected costs?
Specialist mortgage providers like BuildStore help you prepare for the unexpected by:
- Building contingency into your budget – typically 10-15% of total costs.
- Structuring funds to allow flexibility if costs change.
- Reassessing at key stages to ensure the project remains affordable.
- Offering access to advanced stage payments reduces the need for costly short-term borrowing if issues arise.
Mortgage providers such as BuildStore support you all the way through the project, providing support when needed. Our experience means we can flag risks early, from fluctuating material prices to weather related delays.
How will self-builders be supported throughout the duration of their project?
With providers like BuildStore, support doesn’t stop once your mortgage is approved:
Dedicated case managers handle all lender communications.
Build cost assessments ensure your funds match your schedule.
Stage payment coordination keeps money flowing on time.
Customer service teams make sure ongoing advice is available if your plans change mid-project.
We understand that no two projects are the same, so our role is to be proactive and responsive from the first brick to the final sign-off.
WHAT HAPPENS WHEN THE PROJECT IS FINISHED?
When your build is complete and signed off, your self-build mortgage can be switched to a standard residential mortgage product, often at a lower interest rate.
At this stage, the property is valued as a finished home, and your loan-to-value ratio may improve, opening up access to more competitive rates. Your lender or adviser will help you transition smoothly to the most suitable long-term product.
To listen to the full podcast and hear more of what Tom has to say about self-build finance, visit insights.netmagmedia.co.uk