BuildLoan launches short-term borrowing solution for self and custom builders

Self and custom build finance specialist BuildLoan has created a short-term mortgage for builders who need to fund the construction of their self or custom built home until they move in and sell their previous property.

The product – developed with Buckinghamshire Building Society – is designed to meet the needs of clients who want to repay their self-build mortgage in full through the sale proceeds of their previous home.

Self-builders have two years to build their new home and one year to sell their previous home and repay the mortgage, compared to the 12-month maximum term of a regulated bridging loan.

In common with all BuildLoan products, funds are released in stages as the build progresses, with all stage releases agreed at application and based on the cost of each stage of work.

There are no interim valuations, so with no risk of down valuation, borrowers have the peace of mind that they will receive the funds they need at each stage to buy materials or pay their developer or builder.

Funds can be released in advance of each stage of work. This is ideal for those with less cash of their own or who are using a build system such as timber frame, which may require a large up-front payment.

Loans of up to £500,000 and up to 85% of build costs are available, with a current rate payable of 6%, a 2.5% product fee and no early repayment charges.

Chris Martin, head of product development and underwriting at BuildLoan, said: “Most current self and custom build mortgage deals aren’t available to clients who have a shorter-term need for finance. Many self-builders want to stay in their current home while they complete their self-build project and will then repay their mortgage in full. This product takes away the pressure of having to repay a bridging loan within a year, which for many people is unrealistic or too risky.”

Claire Askham, head of mortgage sales at Buckinghamshire Building Society, added: “We’ve designed this product specifically for clients who know they won’t need a long-term mortgage but do need time to make sure their self or custom build home is built exactly how they want it. At the same time they can sell their previous home, without having to accept a low offer to achieve a quick sale.

“To help them afford to borrow what they need to build their home, the mortgage will be arranged on an interest-only basis for the three-year term as we know it will be repaid at that point.”