Self Build Mortgage Deposit Guide – How Much Do You Need?
Planning to build your own home is an exciting step but it also brings a lot of questions, especially when it comes to financing.
One of the main considerations is around the deposit. Unlike traditional mortgages, self build mortgages have unique requirements, and understanding what deposit you need is very important, before going ahead with anything costly.
At Kerr & Watson, we help you understand self build mortgages. Whether you’re just starting to plan or already have land secured, we’ll support you every step of the way and help you secure a mortgage that works with your budget and your build.
What Is a Self Build Mortgage?
Before diving into deposit requirements, it’s important to understand how a self build mortgage works.
Unlike a traditional mortgage, which releases a lump sum upfront to buy an existing property, a self build mortgage releases funds in stages. These stages match the progress of your build, typically from land purchase and foundation work through to completion.
Lenders structure these payments either in advance (before each stage begins) or in arrears (after each stage is completed). This phased approach protects the lender since there’s no physical property as collateral at the outset.
Because of this extra risk, lenders tend to be more cautious with self build mortgages and that’s where the deposit becomes especially important.
Find out Your Options
How Much Deposit Do You Need?
The deposit required for a self build mortgage varies based on a few key factors, including the cost of the plot, the total construction budget, and the lender’s criteria. Generally, you’ll need between 15% and 25% of the total project cost, although this can rise to 40% depending on your circumstances.
If You Already Own the Land
If you already own the land outright, that can count towards your deposit. In many cases, lenders will allow you to borrow up to 100% of the construction costs, provided your land has planning permission and meets their criteria.
However, even in this scenario, most lenders expect you to have a financial buffer. That could mean additional savings or access to funds to cover unexpected costs or delays.
If You’re Buying Land
If you’re purchasing a plot and building on it, the deposit is calculated as a percentage of the combined cost of land and build.
This is where you’re likely to need at least 15% to 25% upfront, and sometimes more depending on the lender’s risk appetite, your credit history, and the build structure.
Having extra funds available can make a big difference in the application process, particularly if you’re aiming for a mortgage with more favourable rates or terms.
Why Lenders Ask for a Higher Deposit
Lenders view self build projects as higher risk. There’s no completed home at the start, and delays, cost overruns, or planning issues can all increase that risk. A larger deposit provides reassurance to the lender and acts as a buffer against financial hiccups during construction.
The deposit helps to demonstrate:
- Your commitment to the project
- Your ability to manage finances
- Reduced risk to the lender if something goes wrong
By contributing more upfront, you also reduce the amount you need to borrow, which can help with affordability assessments.
Types of Self Build Mortgages and Their Impact on Deposit
Advance Stage Payment Mortgages
These are often suitable if you don’t have a large savings pot or if you want to avoid selling your current home to release funds. With this structure, funds are released at the start of each build stage, giving you cashflow to pay suppliers and contractors up front.
Because of the lender’s increased risk with this option, you may need a larger deposit—though some products allow you to borrow up to 95% of build costs if you meet strict criteria.
This option is particularly helpful for timber frame or off-site construction methods where you may need to pay for materials before delivery.
Arrears Stage Payment Mortgages
This is the more common structure, where funds are released after each stage is completed. You’ll need to fund the initial stages yourself and claim the costs back once inspected and approved.
This often requires more upfront capital or access to temporary funding, like savings or a bridging loan. The deposit needed here may be slightly lower than for advance mortgages, but it comes with the need for short-term financial flexibility.
At Kerr & Watson, we can help you decide which type suits your build and financial position best.
What Influences Your Deposit Requirement?
There’s no one-size-fits-all answer, because several factors shape what deposit you’ll need:
- Land ownership: Owning land outright can dramatically reduce the cash deposit required.
- Build method: Traditional brick-and-block builds may be treated differently than off-site manufactured homes.
- Planning permission: Without this in place, you won’t be approved for any kind of self build mortgage.
- Your credit profile: The stronger your credit score and financial history, the more options you’ll have.
- Lender policy: Each lender has different rules, with some more flexible than others.
This is why tailored advice from specialists like Kerr & Watson can make all the difference. We work with a wide range of lenders and know who’s likely to accept your project—and on what terms.
Conclusion
The deposit you need for a self build mortgage will depend on many factors, whether you already own land, the cost of your project, the lender’s criteria, and your financial profile.
While the average requirement ranges from 15% to 25%, it’s possible to secure a mortgage with more or less depending on your situation.
Building your own home is a big undertaking, but with the right planning and the right advice, it’s achievable.
Whether you’re ready to apply or just starting to explore your options, we’re here to give honest advice, tailored support.
Contact us today to talk about your self build plans.
