Finance specialist BuildLoan has created a short-term mortgage for self- and custom-builders who need funding for their projects until they move in and sell their previous home.
The bridging loan - developed with Buckinghamshire Building Society - is designed for those who wish to repay their self-build mortgage in full through the sale of their existing home.
Borrowers have two years to build their new home and one year to sell their previous property and repay the mortgage, compared to the 12-month maximum term of a regulated bridging loan.
Funds are released in stages as the build progresses, with all pre-agreed payments based on the cost of each stage of work.
With no interim valuations, borrowers receive pre-agreed stage payments. Funds can be released in advance of each stage to ease cash flow, particularly with build systems such as timber frame, which may require a large up-front payment.
Loans of up to £500,000 and 85 per cent of build costs are available, with a current interest rate payable of six per cent, and a 2.5 per cent fee.
Claire Askham, head of mortgage sales at Buckinghamshire Building Society, said: “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.”
Chris Martin, head of product development and underwriting at BuildLoan, added: “Many owners 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.”