Building your own property can be a hugely rewarding experience, allowing you to create a home that is built to your exact specifications.
Whilst there will be challenges to overcome along the way, once the project is finished, dealing with all those stresses and strains will definitely feel worthwhile.
Managing the financial aspect of the build can be tricky, especially if there’s a shortfall in your budget. Self-build bridging loans could be an option worth exploring, helping to minimise delays and keep your timeline on track.
Bridging loans offer a strong option for anyone thinking of building their own home, allowing you to:
Building your own home? Try our self-build bridging loan calculator to get a free estimate.
There are pros and cons to taking out a bridging loan compared to mortgage, and it very much depends on your individual circumstances.
Mortgage lenders tend to set strict milestones for the release of funds as initially there is no property that can be used as security.
A common issue faced by self-builders when trying to secure a mortgage is that many lenders will not release funds if the surveyor deems the property to be uninhabitable.
For example, even if a property is structurally sound, it could still be deemed uninhabitable by a surveyor if crucial fixtures and fittings (in the bathroom or kitchen for instance) are not installed.
If you are unable to secure the funding needed to progress the build, this can cause long delays and financial strain.
A bridging loan could work as a solution in this case, offering short-term funding to complete the required work on the property so it can reach the required millstones for a mortgage.
Bridging loans work in a different way to traditional mortgages as they:
Once a lender agrees to a gross loan amount, they will deduct the total interest and any additional fees (lender free, broker fee, etc).
The remaining amount (net loan) will be sent to your bank account. Once the loan term ends, you will then need to repay the gross loan amount.
And because the interest is prepaid, proof of income or affordability checks are not usually required by the lender.
Bridging Loan Breakdown
Item | Amount |
Gross Loan | £111,541 |
Interest payments (12 months) at 0.82% pm | £9,480 |
Lender fee (1.5%) | £1,673 |
Net Loan Received | £100,000 |
At the end of the 12-month loan term you will need to repay £111,641 (other fees may be applied – be sure to check this with the lender before you agree to the loan).
However, if you were to repay the loan after 6 months, the remaining 6 months of unused interest is deducted from the settlement figure, so you end up paying less.
Loan Breakdown
Item | Amount |
Gross Loan | £83,636 |
Interest (12 months) at 1.1% pm | £7,389 |
Lender fee (1.5%) | £1,255 |
Net Loan Received | £75,000 |
At the end of the 12-month loan term you will need to repay £83,636 (other fees may be applied – be sure to check this with the lender before you agree to the loan).
Taking into account your existing mortgage and the bridging loan you have taken out, this would mean the breakdown of your total debt would be:
Item | Amount |
Existing Mortgage | £250,000 |
Bridging Loan (Gross) | £83,636 |
Total Debt | £333,636 |
Loan-To-Value (LTV) | 74.14% |
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Your exit plan is an essential part of taking out a bridging loan as the lender will want to know how you will be able to repay the funds at the end of the term.
Selling the property to exit the bridge is not usually an option, as most self-builders plan to make the property their home.
If you intend to refinance onto another mortgage, lenders will likely require proof of income and/or you to pass an affordability check.
At Willows, we have years of experience helping people to find the right exit plan based on their circumstances. We can also help you explore suitable mortgage options, if required.
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There’s so much to do when it comes to starting a self-build project, and managing your finances will be central to everything you do.
Bridging loans can provide a cash injection at just the right time, whether you have a shortfall or having an existing mortgage in place.
At Willows we understand the challenges you’ll face and can help you overcome them with confidence. From company first or second charge options to crafting a suitable exit plan, we make the process as stress-free as possible.
To find out how, speak with a member of our team today on 01656 766 158
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We’re extremely proud to be rated ‘Excellent’ for our service standards year after year. Since 2008 we’ve helped thousands of customers across the UK to find the right finance for their needs – no matter how complicated the circumstances.
At Willows Finance we ensure your personal information is kept secure and confidential.
PRIVACY OF YOUR INFORMATION
At Willows Finance Ltd, we appreciate that your privacy is extremely important to you. With this in mind, we have put in place a number of measures to ensure that any personal details we obtain from you as a result of visiting this website is processed and maintained in accordance with accepted principles of good information handling and also in accordance with the Data Protection Act 1988.
This statement provides you with details of the type of information we may hold about you, how we obtain and use information and how we protect your privacy.
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
We offer first and second charge regulated mortgage contracts for business or personal use.
Other finance options may include:
Regulatory Status:
We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
You can view our privacy policy at: https://willowsfinance.co.uk/privacy-cookie-policy/.
Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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