Lenders understand that you have to live somewhere during your project and not everyone wants to stay in a caravan on site or with relatives. They also appreciate that if you sell your current house and move into rented accommodation during the build you will still have housing costs, as you would be paying rent. They therefore allow you to run a self-build mortgage alongside the existing mortgage that you have on your current house.

However, the lender wants to make sure that you are in a position to support both mortgages. In practice, that means your current mortgage will be taken into account by your lender when deciding how much you can borrow for the self build. Some lenders calculate the total amount you can borrow based on your income and then deduct the amount of your current mortgage from this.

For example, if the maximum you can borrow based on your income is £150,000 and the mortgage on your current house is £100,000, the lender would limit the borrowing on your self-build mortgage to £50,000. Unless you have a very high income or a tiny current mortgage this method is unlikely to provide you with sufficient borrowing for your project.

There are however a number of more enlightened lenders who view affordability differently. They treat your current mortgage as a regular commitment in the same way as they treat a personal loan and include your monthly mortgage payment amount in their affordability calculation. They will then provide you with a loan amount that your remaining income will support. What this means is that if your current mortgage payments are £250 per month, the total the lender will lend on a self-build mortgage would be reduced by somewhere in the region of £12,000 (although everyone’s circumstances are different).

To increase the amount of borrowing on the self-build mortgage, some people change their current mortgage to interest only during the build. This means that the self-build lender will include a smaller monthly amount in their affordability calculation. All of the lenders who work with BuildStore on the Accelerator scheme base their lending on this method.