Bridging Loan For A Self-Build

The self-build market is definitely attractive for both first time and experienced developers alike. A bridging loan is a great way to fund your self-build property.

If you’re looking for funding for a self-build ABC Finance can help.

What is a bridging loan for a self-build?

A self-build bridging loan is a type of bridging loan that allows you to build a property from the ground up. They can be used to build a house to live in, or for investment purposes.

They can be a great tool to allow property developers to build, or develop property.

In some instances, self-build bridging can refer to heavy refurbishment or conversion projects.

How much can I borrow with a self-build bridging loan?

The maximum LTV is 75% against the purchase of the plot with 100% of the works funded in arrears. The total loan, including fees and interest will need to fall within 75% loan to gross development value (LTGDV).

These figures are on a case-by-case basis and are subject to criteria such as location, experience and client profile.

How much does a self-build bridging loan cost?

Interest rates start at around 0.8% per month for experienced developers on a non-regulated basis – unregulated bridging loans.

For a regulated bridging loan, i.e. you or a family member will live in the new property, rates sit at around 1% – 1.4% per month.

We may be able to offer bespoke rates for large bridging loans over £1,000,000.

Who can take out a bridging loan for a self-build?

We’re able to offer self-build bridging finance to the following applicants:

• Individuals.
• Partnerships or LLPs
• Limited Companies, including Offshore.
• Pension Funds.

Self-build bridging loan deposit

The minimum deposit needed is 25% of the current value, less any fees and interest.

You will also need to factor in costs such as stamp duty land tax (SDLT), valuation and legal fees and funds to begin the build.

You can use other property as extra security for the loan to minimise the deposit needed, this doesn’t always need to be owned by yourself.

What documents will I need to provide?

Most lenders will require the same information, this is typically as follows:

• Application form.
• Details of how the loan will be repaid (exit strategy).
• Proof of ID, i.e. Passport copy.
• Proof of residency, i.e. a recent utility bill.
• Latest 3 months bank statements.
• Development CV detailing previous projects, if applicable.
• Month-by-month schedule of works and costs for the build.

How long does the application process take?

The application process takes 4-8 weeks however this depends on several factors.

The timescales can be affected by third parties such as valuers, solicitors, quantity and monitoring surveyors.

If you do have a deadline to adhere to, it’s worth mentioning this upfront as this can be a factor when sourcing the perfect deal for you.

Read more – 100% bridging loans or Remortgage after a bridge loan.

Self-build bridging loan application process

1. Speak to a lender or bridging loan broker to run through the project.
2. When a preferred lender, and product is chosen, an application form and supporting documents are submitted.
3. The underwriter will review your application and if happy, will instruct the valuation and quantity surveyor (QS).
4. When the valuation and QS report is back, if the details are satisfactory the offer will be issued and legals instructed.
5. Both your, and the lenders solicitor will work towards a completion date.

There are some variables, for example valuations and legals can be instructed before underwriter assessment.

This speeds up the process but is at your cost should the underwriter decline your application.

Should I use a self-build broker?

This is down to personal preference however some lenders will only deal via a bridging loan broker, especially with FCA Regulated self-build loans.

You are able to source a lender yourself, however guidance from an experienced bridging broker can be valuable.

A good broker will know which lenders to approach and will have the experience to deal with your application from start to finish.

Some brokers charge broker fees and this should be considered. ABC Finance charge no broker fee for self-build bridging.

Read more – Bridging loan for a HMO or Bridging loans for barn conversions.

Self-build bridging FAQ’s

Here are some of the questions that we often receive.

Can I live on site during the build?

If this is an FCA regulated bridging loan, you are able to live at the address during the build. It’s quite common for applicants to live on the development site in a static home.

Living on site during the build gives you the added security that somebody is on site overnight.

Non-regulated self-build bridging loans do not permit you to live on site during, or after the build.

Do I need to pay stamp duty?

Stamp duty land tax (SDLT) is generally payable however, as its case-by-case, it’s best to obtain accurate information therefore professional advice should be sought.

Some property developments may be subject to relief or exemption, it’s worth checking this upfront as these costs could impact profitability.

How long can I borrow the money for?

12 months is the maximum term allowed with FCA Regulated self-build loans. This means that the build must be complete and loan repaid within the 12 month period.

The valuer will look at your month-by-month schedule of works and costs, along with their own research, to determine whether this is possible.

Non-regulated self-build bridging loans can be arranged over periods of up to 24 months. In some cases, terms of up to 36 months are available however this is uncommon.

Do I need planning permission?

Yes, full planning permission is required for self-build bridging. If the site doesn’t have the benefit of full planning permission, you can look at planning gain finance.

Once full planning is approved, you can then switch the loan or apply elsewhere for the self-build loan.

When looking at property conversion projects, in some cases permitted development rights apply and is accepted by lenders.

Can first time developers apply?

The simple answer is yes. We are able to offer self-build bridging loans to both first time and experienced developers alike.

Lenders may ask for additional information such as the details of the team you are using for the build and also your asset & liability position to cover any shortfalls later on should they arise.

Will I qualify if I have bad credit?

Yes, most self-build bridging loan funders allow some form of adverse credit.

You should mention this upfront to ensure the right lender is dealing with your application.

How do I repay a self-build bridging loan?

There are various ways to repay self-build bridging finance.

When the project is complete and all relevant warranties and building control sign off is in place, the property can be sold. Much like a standard mortgage, when the property is sold the loan is repaid.

You could of course keep the property and refinance onto a mortgage. This exit route should be assessed upfront to ensure it’s possible.

If you are to live in the property, you must ensure that you are able to borrow enough on a mortgage to cover the total loan balance, including fees and interest, otherwise known as the gross loan amount.

If you own other assets, these can be sold to repay the loan. Lenders will also accept exit’s via inheritance and pensions etc.

Both brokers and lenders will look to establish your exit strategy upfront.

Do I need a new-build warranty and building control sign off?

You should seek expert advice here however, in most cases, both a new-build warranty and building control sign off will likely be required.

For conversion projects, a professional consultants certificate (PCC) will likely be needed.

This is something that should be sorted out at the beginning of the process to avoid issues later on down the line, especially if looking to sell the property.

If the required warranties and sign-off isn’t in place, it will likely mean that the property is not mortgageable.