Self-Build Bridging Loans

Self-build projects are growing in popularity across the UK. Often a more affordable alternative to purchasing an existing property, the self-build option also paves the way for complete customisation.

At UK Property Finance, we specialise in flexible self-build bridging loans for anyone considering a ground-up construction project. From ambitious newcomers to established property developers from all backgrounds, bridging finance can be just the thing to get your next project up and running.

Call today to discuss our bridging loans for self-build homes in more detail, or email us anytime, and we will get back to you as promptly as possible.

Bridging loans for self-build properties

A bridging loan is a specialist type of short-term secured loan that can be used for any legal purpose. True to its name, a bridging loan is designed to ‘bridge’ a temporary financial gap and is typically repaid within one to 12 months.

For self-build property development projects, bridging finance secured against an existing property can be ideal for getting even the most ambitious initiatives off the ground. The funds can be secured against a broad range of valuable assets, including residential, buy-to-let, and commercial properties.

Upon the project’s conclusion, the loan can be refinanced into a conventional long-term repayment structure, like a mortgage. Bridging loan interest rates can be as low as 1% per month if paid promptly, rendering it a highly economical solution.

Prior expertise or experience in property development is not required, nor is a flawless credit score necessary for an application. All that is needed is a feasible exit strategy (indicating how the loan will be repaid) and adequate valuable assets to cover the loan costs.

For more information on any of the above or to discuss the functions of bridging finance in more detail, contact a member of the team at UK Property Finance today.

What are the benefits of new build bridging loans?

Securing finance for a new-build property development project on the high street treads a fine line between difficult and impossible. Particularly if this is your first time considering a ground-up project, you are unlikely to secure the backing of a mainstream lender. A bridging loan can help by securing against a property you already own to raise the capital required to fund the development project.

Traditional mortgages and home loans are simply not designed for purposes like these. If you are looking to finance a ground-up property development project as conveniently and affordably as possible, bridging finance is highly recommended if you have additional assets to use as security.

Bridging advantages explained

Just a few of the main benefits:

  • Quick to arrange: Whereas a traditional mortgage can take several weeks to arrange, a bridging loan can be authorised and accessed within a few working days. Where time is a factor, bridging finance is a far more convenient and accessible facility than any comparable loan or mortgage.
  • Simple repayment terms: During the application process, an agreement is reached to repay the full balance of the bridging loan (plus interest and borrowing costs) by a specific date. No monthly repayments need to be made in the interim, allowing the borrower to take better control of their on-hand capital.
  • Suitable for all purposes: There are no specific limitations placed on how a bridging loan can be used. Irrespective of the complexity or uniqueness of the project, the borrower maintains complete authority over the allocation of funds.
  • No experience is necessary: Depending on the type of project, you may not be required to present any evidence of property development expertise. If you aspire to design your own dream family home, you are not required to possess prior experience as a professional property developer.
  • No early exit fees: Most bridging finance specialists encourage their customers to repay their loans early and save money by doing so. If you decide to repay your bridging loan early to reduce overall borrowing costs, you can do so without being liable for early exit fees.
  • Credit history is unimportant: Lastly, flexible bridging finance specialists welcome applications from poor-credit applicants. Bridging loans are issued on the basis of security and the applicant’s exit strategy, as opposed to the usual ‘binary’ eligibility criteria favoured by high-street banks.

Are there any downsides to bridging finance?

There are a few key issues to be aware of with bridging finance for self-build homes:

  • A strictly short-term facility: Bridging loans are strictly short-term facilities and should never be taken out with longer-term repayment in mind. A monthly interest rate of 0.55% is extremely cost-effective in the near term but might become disproportionately expensive over time.
  • Additional fees may apply: Depending on the type of loan you take out and the lender you work with, there may be additional fees and charges to factor in. Arrangement costs, completion fees, exit fees, legal fees, appraisal fees, and so on are examples of these. Working with an experienced broker can help minimise all such costs.
  • Risk of repossession: Your lender will have the legal right to repossess and sell your assets if you fail to meet your repayment obligations. Most lenders are understanding of individuals in financial difficulty, and repossession is only used as a last resort.

Can I get a loan for a self-build house?

Yes, you can obtain a loan for a self-built house, and a bridging loan can be particularly useful in this scenario. Bridging loans provide short-term financing to cover the construction costs of a self-build project, offering flexibility and quick access to funds during the building process. These loans can be tailored to suit the specific needs of self-builders, allowing for staged payments as construction progresses. Additionally, bridging loans can help cover expenses such as purchasing land, obtaining permits, and hiring contractors before long-term mortgage financing becomes available upon completion of the project. Overall, bridging loans provide a valuable financial tool for individuals embarking on self-build projects, facilitating the realisation of their custom-built home dreams.

Is self-build cheaper than buying?

Whether self-building is cheaper than buying an existing property depends on various factors, such as location, materials used, labour costs, and the level of customisation desired. In some cases, self-building can be more cost-effective as it allows homeowners to bypass expenses associated with buying a pre-built property, such as real estate agent fees and seller markups. Moreover, self-builders have the opportunity to directly oversee and control expenses, potentially saving money through efficient budgeting and sourcing of materials. However, self-building also entails upfront costs like purchasing land, obtaining permits, and hiring contractors, which can be substantial. Additionally, unexpected expenses or delays during construction may impact the overall cost-effectiveness of self-building. Therefore, while self-building can offer cost savings for those willing to invest time and effort, careful financial planning and consideration of all expenses are essential in determining its comparative affordability compared to buying an existing property.

Do you pay stamp duty on a self-build?

The payment of stamp duty on a self-built property depends on specific circumstances, such as the value of the property and the location. In many cases, self-builders may be eligible for relief or exemptions from stamp duty, particularly if they are building their primary residence. Different regions or countries may have their own regulations regarding stamp duty for self-built properties. For instance, in the UK, stamp duty is typically payable on land purchases, but there are exemptions available for self-builders. It’s essential for individuals embarking on self-build projects to research the relevant tax regulations and consult with legal or financial professionals to understand their stamp duty obligations accurately.

Can you build a house for 100k in the UK?

Building a house for £100,000 in the UK can be challenging but may be feasible depending on various factors such as location, size, materials used, and labour costs. While it’s unlikely to construct a large or high-specification property within this budget, smaller or more modestly sized homes, particularly in less expensive areas or utilising cost-effective construction methods, may be achievable. Self-build projects, careful planning, and cost-saving measures such as DIY work or using reclaimed materials can help stretch the budget. However, individuals should be realistic about their expectations and thoroughly research costs to ensure feasibility and avoid unexpected expenses. Additionally, government schemes or incentives for self-build projects may provide financial assistance or support, further enhancing affordability for those looking to build a house within this budget range.