Two different products for two different purposes
Self-build mortgages and development finance both fund construction projects, but they're fundamentally different products designed for different borrowers with different goals. Choosing the wrong one costs you money and may mean your application is declined.
Self-build mortgages
A self-build mortgage is designed for individuals building a single home that they intend to live in as their primary residence. Key characteristics:
- Rates: 4–6% (comparable to standard residential mortgages)
- LTV: Up to 85% of land value + build costs, or up to 75% of completed value
- Term: 25–35 year mortgage term (like a standard mortgage)
- Regulation: FCA regulated — lender must assess affordability for personal occupation
- Stage payments: Typically advance or arrears-based (some lenders release funds before each stage, others after)
- Lenders: Specialist self-build lenders (BuildStore, Ecology BS) and some high-street lenders
- Exit: You live in the home and repay the mortgage over 25+ years
Development finance
Development finance is designed for property developers building one or more units for sale or rent. Key characteristics:
- Rates: 7–14% (higher due to commercial risk)
- Leverage: Up to 90% LTC, 70% LTGDV
- Term: 12–24 months (short-term, repaid on exit)
- Regulation: Not FCA regulated (commercial lending)
- Drawdowns: Staged releases verified by monitoring surveyor
- Lenders: Specialist development finance lenders, challenger banks, funds
- Exit: Sell the completed units or refinance onto investment mortgages
Quick comparison
- Building 1 home to live in: Self-build mortgage
- Building 1+ homes to sell: Development finance
- Building 2+ homes to rent: Development finance, then refinance to BTL
- Converting a building into flats to sell: Development finance
- Major renovation of your own home: Self-build mortgage or renovation mortgage
The grey areas
Some projects sit between the two. Building two homes — one to live in, one to sell — can be structured either way. A large extension or renovation that effectively rebuilds your home might qualify for either product. In these cases, talk to both self-build mortgage brokers and development finance lenders to compare the total cost.
If your project involves building to sell for profit, development finance is the right product. Submit your deal on Assesr to get an AI credit paper and matched lender offers in hours.