Can You Get a Mortgage for Your SIPs Self-Build Home?

Looking for SIP construction mortgage for your new home and wondering where to start?

If you’re new to the world of Sips self-builds, it can seem a little daunting trying to figure out how to best fund your new dream home.

Perhaps you’re worried about going from lender to lender, and being turned away everywhere you look. If so, you needn’t be. 

Due to SIPs being a recognised standard method of construction, it’s actually a lot easier than you might think to get a mortgage for your SIPs self-build home.

As a specialist SIP supplier with over 35 years’ experience, we wanted to make things a little easier by shedding some light on SIPs mortgages, below – as well as giving you some tips and advice on where to start looking.

SIPs self-build mortgages at a glance 

• Lenders treat SIPs as a recognised standard method of construction, in the same way as timber frame and brick and block.
• A self-build (stage payment) mortgage releases funds in stages, rather than as one lump sum.
• Standard self-build mortgages typically lend up to 75% of project costs. Specialist products through BuildStore can lend up to 95%, or 100% if you already own your plot, capped at 85% of the expected end value of the home.
• Cost-based mortgages release funds based on your build costs, not interim valuations, which suits the predictable cost structure of a SIPs build.
• Interest-only payments can be arranged during the build, and you only pay interest on the funds you’ve drawn down.

How to get a mortgage for your SIPs self-build home

Getting a mortgage on your SIPs self-build home has never been easier. It is now relatively straightforward to find a lender who will provide you with a mortgage to finance your SIPs self-build aspirations.

This is because, as we mentioned above, SIPs are recognised as a standard method of construction, much like timber frame and brick and block are.

But, which sort of mortgage should you choose? Well, it goes without saying that building your own home is very different from just buying a new home. Naturally, this means the type of mortgage you’d apply for would be different.

We would recommend looking into a self-build mortgage.

Why a specialist approach matters: while it’s possible to approach a handful of lenders directly, the product range is usually limited and rarely takes your build costs or payment schedule into account. Most general mortgage brokers also handle only one or two self-build enquiries a year, if any. That’s why we work with a specialist self-build broker rather than pointing you to the high street.

What is a self-build mortgage?

A self-build mortgage is a unique type of mortgage that releases funds in stages throughout the build process, rather than being released all in one lump sum. This is ideal for self builders, as you will have a continuous supply of cashflow to fuel your project.

One company specialising in funding SIP self-build projects is BuildStore – one of our partners. They offer a cost-based stage payment mortgage which releases funds before each build stage. This is guaranteed to be released based on the costs of the next build stage.

The other benefit of this unique type of mortgage means you will always have the cash available to meet your payment terms.

NOTE: Lending criteria may require you to use approved materials for the outer skin of your build. This helps ensure the building is protected from the elements and maintains its visual appeal.

BuildStore has helped more than 30,000 people build their own homes and has developed more than 60 exclusive mortgage products designed around the problems individual homebuilders commonly face. It also holds a 4.5 out of 5 Trustpilot score. Stage payments can be made in arrears or in advance, and are matched to a cashflow prepared from your checked build costs, so the money is there when trades need paying.
The two main types of self-build mortgages

There are two main types of self-build mortgages you’ll come across; valuation-based and cost-based. We’ve explained a little more about each below.

Valuation-based

A valuation-based stage payment mortgage is a mortgage that releases the funds after each stage of the build, and after there has been a valuation taken to show the increase in value.

Bear in mind, this method is structured more towards traditional building methods, rather than SIPs.

Through BuildStore, valuation-based mortgages can lend up to 85% of your plot and build costs, compared with around 75% from most other lenders. Because each release depends on a valuation showing an uplift, there is a risk of the property being devalued mid-build, particularly at foundation stage.

Most lenders also hold a retention of 5–10% of the loan until the build is complete, which can squeeze cashflow in the final stages when electricians, joiners and plumbers need paying promptly. If you have substantial savings, or already own your plot and can remortgage to fund the start of works, valuation-based payments can still work.

Cost-based

This is a specialist mortgage method that works exceptionally well when using the SIPs home building system. Choosing this method means you are guaranteed payment based on the cost of your building.

This payment can then be before or after each stage of the build depending on the agreed payment schedule.

BuildStore’s cost-based mortgages allow you to borrow up to 95% of your plot and build costs, with stage payments guaranteed irrespective of lender interim valuation figures. Practical benefits for self-builders include:

• Avoiding delays caused by a valuer visiting site before funds are released
• Being able to pay suppliers and trades on time, and negotiate better deals on materials as a cash buyer
• Staying in your current home until the new one is complete
• Interest-only payments during the build, with interest charged only on the funds drawn down at each stage 

Advice from a specialist SIPs supplier

It depends on your income, outgoings and financial circumstances, as with any mortgage. As a guide, standard self-build mortgages typically lend up to 75% of project costs. Specialist cost-based products can lend up to 95%, or up to 100% if you already own your plot, with a maximum of 85% of the expected end value of your home.

Cashflow matters more than headline rate

When building, the single most important factor is having sufficient funds available at the right time. Interest-only payments can be arranged during the build, and once the home is complete you can typically switch to a lower-rate residential mortgage. Mismatched stage payments are one of the quickest ways to run into cashflow problems that jeopardise a build, which is why an accurate, professionally checked cost schedule is so important.

Other funding options for a SIPs self-build

A stage payment mortgage isn’t the only route. If you have enough equity in your current home, you could remortgage or use a bridging loan to buy the plot, fund the build, or both, then sell your existing home once the new one is finished. Buying a plot at auction typically requires a 10% deposit up front and completion within around 28 days, a timescale a bridging loan can meet.

Insurance and warranty requirements

Lenders will insist on adequate insurance before releasing funds, and normal home insurance doesn’t cover building works or an unoccupied property, so you’ll need specialist self-build site insurance. Most lenders also expect a 10-year structural warranty, which covers defects in design, workmanship or materials in a way an architect’s certificate does not.

The best advice we can give you is to seek expert mortgage advice as soon as possible – and well in advance of construction – because this will set you up best for the project to come.

A specialist self-build mortgage adviser should be happy to advise and help you explore all of your options. We would highly recommend getting in touch with our partner, BuildStore, for some no-strings advice on this type of mortgage when constructing with SIPs.

TIP: For more information on BuildStore Mortgages, visit the official BuildStore mortgages page.

In summary

We hope you’ve found this article helpful when looking for a self-build mortgage for your SIPs home. It can seem a little daunting when you’re not sure where to start – and that’s probably why you stumbled across this blog during your research.

Remember, if you’re just looking to explore all your options, a specialist self-build mortgage adviser – like our partner, BuildStore – should be happy to help.

If you have any other questions about your SIPs self-build, don’t hesitate to get in touch – our friendly team are always here to help.

Wishing you all the best with your self build!