The money being loaned is released on completion of each stage of the building process. A separate loan can be released to pay for the purchase of the land, with a mortgage paying anything between 75% and 95% of the cost of the build.

Taking out this type of mortgage means that you have a negative cash flow and labour and materials will have to be paid in arrears. Many people relieve the cash flow pressure by selling their home and either living in rented accommodation or in a caravan onsite for the duration of the build.

Some lenders are now addressing this by offering a capital raising charge on your existing mortgage. This is basically remortgaging your home for a higher value than your existing mortgage, so you are using some of the equity built up in your existing home to fund your new home. This gives you a lump sum with which to buy the land and begin your build.

Arrears payments will usually be paid on completion of four main stages:

Foundations
Roof plate
Plastering
Completion

The payments will be made after a site inspection, which will usually be charged at around £50 per visit. This is the lender’s guarantee that money will only be released when there is sufficient value in the build to repay the debt in the event of repossession.

Other areas to look at include: problems with mortgage arrears, association housing, adverse arrears credit