What is a self build mortgage?
It’s a mortgage for people who are building their own home.
Self build mortgages work differently to regular mortgages:
- With a standard mortgage for a ready built house, the money is released in one go
- With a self build mortgage, you draw down the money in stages - for each stage of the build
You only pay interest on the amount you’ve drawn down from a self build mortgage, not the whole loan amount.
How much deposit do you need?
This varies depending on:
- The lender’s criteria e.g. how many times your salary they can offer you and their maximum loan to value percentage
- Whether you already own the site or need the loan to cover this too*
- Whether you’re a first time buyer or already own a property
*If you own the site, you can use this as your deposit.
First time buyers
The maximum loan to value (LTV) is 90% of the site cost or value plus the cost of construction or 90% of the valuation on completion - whichever is the lower.
So, this would mean you’d need a 10% deposit.
Second time buyers
The maximum LTV is 80% of the site cost or value, plus the cost of construction or 80% of the valuation on completion - whichever is lowest.
So, this would mean you’d need a 20% deposit.
If you own the site, you may get up to 100% of the cost of construction, if the valuation on completion isn’t above:
- 90% for first time buyers
- 80% for second time buyers
Not all lenders in Ireland offer the LTVs shown above - their maximums may be lower.
You’ll also need at least 10% of the total cost as a contingency for any unforeseen costs.
How much can you borrow?
You can usually borrow 3.5 times your salary with self build mortgages.
Lenders need to be confident you can comfortably afford your mortgage, insurance and bills each month. You’ll also need sufficient savings to cover any unexpected build related expenses.
Our guide: How much can I borrow? looks at the things that affect your borrowing.
For an accurate quote, you’ll need to speak to a lender and get a mortgage approval in principle. This is the amount they could lend you based on initial checks, but it’s not a mortgage guarantee.
Who offers self build mortgages in Ireland?
These are the main lenders that offer self build mortgages:
Their lending criteria varies and your personal circumstances will be taken into account.
Some lenders offer the option of an interest only mortgage for the first 12 months, to help keep costs down in the first year.
Applying for a self build mortgage
The lending criteria for self build mortgages can be stricter than other types of mortgage.
This is due to costs and timeframes often being stretched and some projects sadly not completing - making them a high risk to lenders.
Employment checks are usually more stringent, and you’ll need proof of either:
- Your deposit contribution
- Ownership of the site for your new home (which may be used as your deposit)
Our guide: Preparing for a mortgage application has some useful tips and advice.
What documentation do you need?
Before your mortgage can be approved, you’ll need to provide your lender with some documentation including:
- Final grant of planning permission*
- Site map
- Professional indemnity insurance and initial report from your Architect/Engineer/Surveyor
- Building plans and costings
- Initial valuation
*You can check the Citizens Information website for more information on planning permission, including the different types.
The stages of the self build mortgage process
There is usually flexibility over the number of ‘stage payments’ you can receive, to best suit your build. This is when a payment is made to cover part of the build.
For example, if you’ve already bought the site, you’ll skip the first stage.
There are usually between 4-6 payment stages. They may include when you:
- Buy the site
- Prepare the site and foundations
- Build the floor level
- Build the roof level e.g. the property’s frame or shell
- Finish the property e.g. electrical wiring and plumbing, and it’s liveable
- Have received the Certificate of Compliance and had the final valuation done
Each stage of the build must be certified by an official certifier before a payment is released. Payments are requested each time via your solicitor.
What insurance do you need?
It’s vital to protect the funding for your home as well as the actual property - both during construction and when it’s fully complete and furnished. Here are the insurances you need:
Self build insurance
This protects your home while it’s being built as well as the site and property, from damage caused by:
- Break in and theft
It can also include public and employers liability if you opt for direct labour rather than paying a contractor to manage the project.
There are mainly financial brokers that offer self build insurance, also known as buildings under construction insurance.
Check that your lender doesn’t include this insurance for free before shopping around for it.
Mortgage protection insurance
Having mortgage protection is a condition of getting a mortgage, including self build mortgages. It protects both you and the lender throughout the mortgage term, by paying off the loan if you die.
Our mortgage protection insurance guide has all you need to know the different types, how they work, and how to find the right cover.
This type of insurance is also compulsory with most lenders. It covers the physical building itself including the roof, walls, permanent structures, and outbuildings.
Our guide to buildings insurance explains the features further and how to choose the best policy.
Other types of insurance
There are some insurances that aren’t compulsory with a mortgage, but they could offer additional financial protection, depending on the cover you already have.
If you’re still unsure what insurance you need, speak to a financial adviser.
Self build mortgage FAQs
Can I claim the Government's Help to Buy (HTB) incentive?
Yes, self builds are included in the HTB scheme but you’ll need to meet other criteria too:
- Be a first time buyer
- Build your new property by 31 December 2021
- Use the property as your main home for five years after building it
- Be tax compliant
The approved valuation of the property must not be over €500,000.
You’ll also need to use a Revenue approved developer and contractor.
If you qualify, up until 31 December 2020, you can claim €30,000 or 10% of the property’s completion value - whichever is lower.
Between 1 January 2021 and 31 December 2021 - when the scheme ends, you can claim €20,000 or 5% of the property’s completion value - whichever is lower.
Do I have to pay stamp duty on a self build property?
Yes. If you’ve bought a site with a linked agreement to build a property on, you must pay stamp duty on the total site cost and construction cost, excluding VAT.