Buildloan launches short-term borrowing product for self-builders

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

Developed with Buckinghamshire Building Society, the product is designed for 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.

Claire Askham (pictured), head of mortgage sales at Buckinghamshire Building Society, said: “We’ve designed this product specifically for clients to 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.”

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 either so borrowers don’t risk down valuations and will therefore get the money they need at each stage. Funds can also be released in advance, which is good for those with less capital, or who are using a build system that needs a large up-front payment.

Chris Martin, head of product development and underwriting at Buildloan, said: “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.”