Everything You Need to Know About Self-Build Mortgages: Expert Advice from BuildStore

BuildStore is the UK’s leading self-build mortgage specialist, essentially a mortgage broker focused on self-build, custom build and renovation projects. They offer tailored mortgage products, expert advice and end-to-end support.

"We guide clients through every stage of the journey," says Tom. "From helping them find the right plot via our PlotSearch website, to securing finance and supporting them through to completion."

BuildStore provides access to the full market of lenders and self-build mortgage products, ensuring the right fit for every project.

Self-build mortgages fund a home that doesn’t exist yet, so this makes lenders naturally more cautious. Not all lenders offer self-build mortgages, so you’ll have a smaller pool to choose from compared to traditional options. 

The key difference lies in how the funds are released.

With a traditional mortgage, you borrow a lump sum based on the value of an existing property, which you then use to make the purchase.

With self-build mortgages the money is released in stages [either in arrears or advance] as you reach key construction milestones. For example, with a Coldwells Build Passivhaus, the typical stages are:

• Stage 1: Purchase the plot 
• Stage 2: Site prep, groundworks & foundations
• Stage 3: Off-site prefabrication of Coldwells Build Passivhaus 
• Stage 4: Delivery & assembly of Passivhaus to weathertight & airtight stage 
• Stage 5: First fix joinery & plastering
• Stage 6: Second fix to completion
   

Therefore, a lender might give you five to six stage payments to finance your Coldwells Build Passivhaus from buying the plot to completing the build.

"This staged release structure is designed to match the cashflow needs of the project," says Tom. "At BuildStore, we model your cashflow based on the specifics of your build, as no two are the same."

With a self-build mortgage, there are two different ways stage payments can be made:

• Arrears stage payments: 
  Money is released after each stage of the build is completed. This means you’ll need to pay your contractor upfront, then get reimbursed by your lender for an agreed percentage of the costs. This approach works well if you already own your plot or have a large deposit, as it helps maintain positive cash flow throughout the build.
   
• Advanced stage payments: 
  Money is released before each stage begins, "providing the funds you need to pay manufacturers, trades and suppliers when required," says Tom. This approach is especially useful for off-site, prefabricated homes like the Coldwells Build Passivhaus, where bigger upfront costs—such as deposits for manufacture and delivery—are required.

"Engaging with a specialist mortgage broker should be one of your first steps, even before purchasing land or finalising your plans," Tom explains. "Early discussions help clarify how much you can borrow, set realistic expectations and align your budget with your design goals."

Tom stresses the importance of setting a clear, realistic budget from the outset and sharing this with your architect or design/build team. "These professionals should design your home to your budget, to avoid costly surprises later."

Including a contingency fund is essential, especially with recent rises in material and labour costs. "A buffer of 10–15% of your total budget can help cover unexpected price increases or delays," says Tom.

"However, this can be less if you’re working with a main contractor on a fixed price. That’s why BuildStore offers a build cost review from industry specialists—to ensure your budget is realistic before you start."

One of the first challenges many self-builders face is a bit of a catch-22: they don’t know how much they need to borrow until they find a plot, but they can’t confidently search for a plot without knowing how much they can borrow. 

"It’s a common dilemma," says Tom. "But at BuildStore, we can help establish your budget early on, factoring in plot costs, professional fees and build costs so you know exactly what you’re working with." 

From there, tools like PlotSearch allow you to find plots that match your budget, keeping you financially grounded while targeting the right opportunities.

When applying for a self-build mortgage, lenders typically require:

• Proof of affordability and cash flow plans
• Detailed build plans and budgets
• Planning permission for the project
• Structural warranty insurance
• Evidence of savings or equity in land
   

"These factors ensure that the project is feasible and risks are managed," says Tom. 

"Yes," says Tom. "There are short-term mortgage products designed specifically for clients who may be asset-rich but income-poor."

These options don’t have the usual age restrictions of standard self-build mortgages because they focus on assets rather than income. 

Tom adds, "There are time limits on how long you can have the funds for, so it’s important to work with a specialist like BuildStore to find the right product."

"Traditionally, self-build projects required a large deposit," says Tom. But that’s changing. "Through BuildStore’s lending partners, it’s now possible to borrow up to 95% of the plot cost and up to 95% of the build cost—making self-build a real option, even for first-time buyers."

Research shows that energy-efficient homes, such as those built to the world-leading Passivhaus standard, can make mortgages easier to afford due to significantly cutting heating bills and household running costs.

"Passivhaus homes are increasingly gaining lender recognition," says Tom. 

"All of BuildStore’s lenders will finance Passivhaus homes and will support off-site manufactured systems, including structural timber frame, Structural Insulated Panels [SIPS] and Insulated Concrete Formwork [ICF]."

If you're applying for a self-build mortgage, your lender will require a structural warranty on the new home. This 10-year insurance policy protects you against defects in design, materials, or workmanship.

"Although the warranty only becomes live once your home is finished, it has to be arranged before work begins on site," explains Tom. "The warranty provider will send inspectors to the site throughout the project to make sure your property is being built to a specific standard."

Adding on structural warranty at the end of the build will make it more costly. Warranty providers will charge a higher price, as the inspectors won't have had full visibility of the build process.

In addition to structural warranty, the lender will want to see proof that you have taken out site insurance to cover you for any injuries on the site or property damage, and the cost of rebuilding the home if it’s destroyed.

Here’s how the process typically unfolds:

1. Initial discussions to establish borrowing capacity
2. Lender decision in principle
3. Mortgage application completion
4. Submission of detailed plans, budgets, and planning permissions
5. Build cost assessments and cashflow modelling
6. Underwriting approval based on project viability and applicant financials
7. Mortgage completion
8. Staged release of funds as the build progresses co-ordinated by BuildStore
9. Build completion and mortgage review

Many of our clients ask about the best way to finance their Coldwells Build Passivhaus and the insurance coverage they’ll need. 

To help, we’ve teamed up with BuildStore to create a comprehensive finance and insurance manual. It covers BuildStore’s range of services, including mortgages, site insurance and structural warranty, giving you the support to build your Coldwells Passivhaus with confidence.

• Download it here