Our Guide to Self-Build Mortgages

12th January 2021

Helping your clients achieve their homebuilding dreams.

We have the expertise, knowledge, and experience of this niche sector to support your client’s self-build ambitions.

We know that clients usually think long and hard before embarking on their self-build project. They often undertake significant research and some may already have a plot of land in mind. Perhaps they already own the land, or maybe they are at the very beginning of their self-build journey.

Whatever their circumstances, you and your client will want to deal with a lender you can trust to manage the specific needs of self-build borrowers. We understand the pressures on both cash flow and timescales and we can help you and your client through the process.


Vernon’s self-build mortgage

We offer a two-year discounted self-build mortgage, with guaranteed stage payments based on cost. This means there is no requirement for interim valuations to be carried out during the build.

Your client can borrow up to 75% on their land and build costs, with a maximum final LTV of 80%.


When are stage payments made?

We release the payments in arrears on completion of the following build stages:

  • Land – max 75% of value,
  • Foundations,
  • Wallplate level,
  • Wind and watertight,
  • First fix and plastering,
  • Second fix to completion.

We will lend a maximum of 75% of the build cost at each stage.


Our current self-build mortgage

This two-year discount mortgage comes with an interest rate of 4.14%, which includes a 1.21% discount from our Standard Variable Rate for 2 years, followed by our Standard Variable Rate for the remainder of the term, currently 5.35%. The interest rate for this mortgage is 'floored', which means that while the rate may increase, it will never fall below 3.99% during the discount period.


Early repayment charges

If the mortgage is repaid in part or full during the initial period then an early repayment charge of 2% of the capital balance will be payable.

If the mortgage product is transferred to a mainstream residential mortgage product with Vernon Building Society, then this charge will be waived, providing that the product transferred also has an initial discount or fixed rate period with early repayment charges. This is upon satisfactory completion of property construction.


Representative Example

A mortgage of £296,896.00, payable over 21 years, on interest-only repayment basis, with an initial discounted rate of 4.14%, which includes a 1.21% discount from our Standard Variable Rate (SVR) for 2 years and then on our SVR, currently 5.35%, for the remaining 19 years. The initial term would require 24 monthly payments of £1,024.29, followed by 228 monthly payments of £1,323.66.

The total amount payable would be £626,647.44, made up of the loan amount (£296,896.00), plus interest (£326,377.44), Arrangement Fee (£1,999), Standard Valuation Fee (£630), Valuer Reinspection Fees - £65 each, up to 5 required (£325), Solicitor Fee (£250), Funds Transfer Fee (£15), and a Mortgage Exit Fee (£155).

The overall cost for comparison is 5.40% APRC.

This information may not be representative of your personal circumstances and your payments may differ from this. Representative data as of 1st January 2022.


What's the Vernon’s lending criteria for self-build applications?

All new mortgage applications must be supported by a mortgage valuation report, which confirms that the property to be built is suitable for our mortgage and estimates the final value.

A valuer reinspection fee is payable on completion of each build stage before that stage’s funds can be released. All funds released are in arrears of the build stage that is achieved.

A re-inspection will also be required at completion of the final build.


What documentation will your client need to submit?


  • Plans and elevations
  • Detailed costings
  • Copy of Planning permission
  • Copy of Building Regulation approval
  • Schedule of works including dates
  • Details of the structural warranty
  • Evidence of capital the applicant has available
  • Details of residence during the project (rent/mortgage/caravan etc.)

Find out more

Our intermediary team will answer your call quickly and provide you with a personal and professional experience. Call us on 0161 424 4327