Self-Build Mortgages for First-Time Buyers

Thinking of building a home rather than buying one for your first-time purchase? Find out how to get a mortgage to support that in the guide below.

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Home Self Build Self-Build Mortgages For First-Time Buyers
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: April 22, 2024

If you want to create your first home rather than buy an existing one, you’ll likely need a self-build mortgage. But as a more complex project that comes with slightly higher risk for the lender, what would you need to secure such a loan and can you qualify when you haven’t owned a home before?

This guide explains all you need to know about the self-build mortgage landscape as a first-time buyer, helping you on your way to building your dream home.

Can you get a self-build mortgage as a first-time buyer?

Yes, you can. Your choice of lenders and deals will be narrower than if you were buying an existing home, new build or were opting to self-build after years of previous home ownership but it’s still possible.

A broker would be able to share which lender to apply to and how to secure a good deal.

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Eligibility criteria

In order to secure a first-time home builder loan, you’ll have to meet a series of requirements, just like with any kind of mortgage.

While each lender will have their own criteria, they typically include stipulations around:

Income: A lender needs to know you’ll be able to repay the loan, which means you have to have a reliable income that will adequately cover the repayments. Lenders usually multiply your salary by 4 or 4.5 times to assess how much they think you can afford to borrow.

Age: As with any mortgage application, you’ll need to be older than 18 but some lenders stipulate that with a self-build mortgage the applicant must be over 25.

Credit history: First-time buyers and self-building both equate to a higher risk level in the eyes of a lender. Having bad credit could be an extra risk element they’re not willing to take on while good credit would reassure them of your ability to repay. Should you have bad credit, don’t disregard your plan though. Instead talk to a broker about finding a specialist provider and ways of improving your credit.

For a self-build mortgage you’ll also need to have:

Planning permission: The lender will need to know that you have the authorization to build on the land you plan to and that you have building regulations approval.

Detailed building plans: These should show exactly what you plan to build and include a timeline, a breakdown of the various costs of labour and materials, a risk assessment and contingency plans.

Contracts: As a first time buyer, lenders will likely want you to team up with professional home builders to reduce that risk level. Sharing the details of the construction team via a contract will strengthen your application.

Deposit requirements

If you’re a first-time buyer opting for a residential property, it’s possible to get a mortgage with as little as 5% saved as a deposit. But building a house as a first-time buyer, means the minimum deposit is usually much higher at 25% of the build cost. In some cases, a lender may require up to 40% as a deposit.

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How to get a first-time buyer self-build mortgage

Your first step should be to find a specialist mortgage broker with experience in this area as this will boost your chances of getting approved at the best terms available.

Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online. They’ll be able to help with:

  • Preparing your project plan for approval and readying all other necessary paperwork
  • Downloading your credit reports
  • Finding the right lender and securing the best deal for you

Where to apply

The market is fairly split when it comes to which lenders offer self-build mortgages. Barclays, TSB and HSBC for example don’t offer such a product but Together, Vernon Building Society and Beverley Building Society do.

When it comes to first-time buyers, that selection of lenders reduces yet again but you’ll find that there is still a selection to apply to including:

  • Halifax Intermediaries
  • Scottish Building Society
  • Progressive Building Society
  • Earl Shilton Building Society

It’s likely that the rates they’ll offer will be slightly higher than on other residential mortgages to mitigate the risk. To discuss whether or not you’d meet the criteria and assess whether there are potential deals to be had with specialist lenders that only deal with brokers, talk to an expert.

Alternatives to a self-build mortgage

If a self-build mortgage doesn’t look like a viable option for this project, there are other options that could help. These include: 

The Help to Build initiative: While you’d still need to apply for a self-build mortgage with this option, this government scheme boosts the deposit for applicants. This makes you attractive to more lenders thus increasing your chances of getting a mortgage. The government loan is repaid at the end of the loan term while interest is paid over time.

The First Homes scheme: In this government scheme, first-time buyers are able to purchase a home at a significant discount. New builds are eligible in the scheme and while you wouldn’t be building the home yourself, you’d still be purchasing a brand new home and you’d be able to work with the developer to make some modifications so that the style is more in line with what you’re looking for.

Right to Build register: Created by the UK government, in 2016, this initiative allows you to register your interest in potentially creating your own home. This information is funnelled to the relevant local authority who in turn will keep you updated should any opportunities that allow for individual permits in plots in your area open up.

Other potential avenues of funding include:

A bridging loan: This is a short-term loan that provides the money you need until you’re able to secure longer-term finance. In this situation, it could be used to cover the costs of construction until you’re able to sell the completed property or take out a residential mortgage on it.

Personal finance: If you plan to use the property to live in once it’s complete, you could apply for a personal loan. While common uses tend to be debt consolidation, to pay for a wedding or a big holiday, home improvements do fall within their remit.

Commercial finance: If you plan to use the completed property for business – perhaps you want to open a gym or restaurant – you could consider various types of commercial finance such as commercial development finance, mezzanine finance or joint venture property development finance.

Get matched with a self-build mortgage specialist

Applying for your first mortgage is a daunting enough process without having to pair it with building a property for the very first time. Thankfully, there are professionals on hand to guide you through the entire experience. 

A number of the brokers we work with are experts when it comes to finding the funding to turn your project from a pipedream to reality. In an initial and free consultation they’ll find out more about your circumstances before navigating you through the various application forms until you find the financing you need. Just call 0808 189 2301 or fill out this form and you’ll soon be sat down with a specialist.

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FAQs

Yes. If you’d like to take out a mortgage solely to buy a piece of land, there are lenders open to this arrangement. You should however expect higher rates. A broker would be able to help secure one of the most competitive available.

You will need to apply to the local authority who will make an assessment based on what you plan to build and whether there are any restrictions in that area. If you’re working with an architect, they should be able to help with your application.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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