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Self build: a guide to stage payments

For clients looking to build their own home, convert an existing property or commence a knock down and rebuild project there are many building stages along the way. This is where stage payments can help with their finances.

What are stage payments?

Stage payments are where your client needs the mortgage funds released in stages. This means they only pay interest on the amount released and, as the build progresses and they require more money, they will be able to request further funds up to the amount agreed (not exceeding 80% LTV at any stage).

When can stage payments be requested?

We do not have any set criteria on when stage payments can be requested. Whilst we will need to have a good idea at the point of application of the expected stages and amounts required we know that most projects do not run to plan! By employing a flexible approach we are able to consider releasing stage payments as and when they are most required.

Firstly, we will lend on the value of the land, whether already owned (for at least 6 months so the land registry has been updated) or being purchased. If a knock down and rebuild, we would lend on the value of the land and need that to repay any existing borrowing so we always have first charge.

After that, funds are released whenever needed, usually at certain benchmarks of the build, such as completion of foundations, the building up to eaves level, when watertight and windows installed, fixtures and plastering and finally, on completion of the build.

Top Tip!

As you get used to working with us to meet your clients stage payment needs, we suggest you initially complete and submit our self build enquiry form, so that we can review the proposition, run affordability calculations and give an early indication as to whether we are likely to be able to help. Click here to access the form.

How to input a self build application using our online portal

If you have a client requiring self build mortgage with stage payments here’s what you’ll need to do when submitting the application:

  • In the “loan amount” field make sure you enter the total borrowing, regardless of the stage payments.
  • In the “initial drawdown requirement” field enter the amount of money required for the first stage payment.
  • In the “estimated value” field enter the expected property value on completion of the build.

Further tips on using our portal can be found here.

If you have any questions about self build we’re here to help – give our experts a call on 0330 123 1073.

Click here to view our self build products.

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