Self Build Loan Fund - Frequently Asked Questions (FAQs)
Can I apply to the Self Build Loan Fund to purchase a house plot?
No, as the loan is secured against the house plot. You need to own the house plot outright prior to submitting an application. Where a second charge mortgage or ranking agreement exists, it may still be possible to grant a loan.
Is the Self Build Loan Fund a mortgage?
Not in the traditional sense; the fund acts as bridging finance for the duration of the construction of your home only. It has similarities to a mortgage in that the loan is secured against your house plot/new home and discharged when you obtain mainstream mortgage finance upon completion of your home.
Can a tenant crofter and owner-occupier crofter apply for a Self Build Loan?
Yes. However, you will need to be in the process of de-crofting your house site, as the Scottish Government will take out a standard security against the de-crofted house site as security for the loan. For further information on de-crofting please contact the Crofting Commission http://www.crofting.scotland.gov.uk/
Can I apply for the Self Build Loan Fund if I also apply for the Croft House Grant?
Yes. Both sources of finance can be used for the same project. For further information on the Croft House Grant please contact the Scottish Governments Rural Payments and Inspections Division: https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/croft-house-grant-/
Is the Self Build Loan Fund a grant?
No, it is a loan that you would repay together with the accrued interest, arrangement fee, registration fees and legal fees within a fixed period, typically within 12 months. You can, however, repay the loan at any time before the end date stated within the loan agreement.
How much interest is charged?
Interest is currently charged at 5.5% per annum and calculated daily during the duration of the loan agreement. However if you default on repaying the loan, an interest rate of 9% per annum, calculated daily, is charged until such time as the loan is repaid. Please note that your house plot/new home may be at risk if your default on repaying the loan.
I own my own home, but I want to build another, can I apply?
No, however if you were to sell your house and move into rented accommodation, you would be able to apply, subject to meeting all of the other relevant criteria.
Why can’t I apply if I own my own home?
The loan fund is to assist people who cannot access mainstream self-build finance, but who wish to own their own home. In most cases, if you own your own home, you will be able to access mainstream self-build mortgage finance.
I live in rented accommodation, but I own a flat which I rent out, because I am unable to sell it?
Unfortunately you would be unable to apply as you already owned a home. The fund cannot support what would be seen as second homes.
I have been offered a self-build mortgage, but the interest rate is more expensive that the Self Build Loan Fund, can I apply to the Self-Build Loan Fund?
No. The fund exists for those who cannot obtain mainstream self-build mortgage finance, but who will be able to access a mortgage upon completion of their new home.
I own a farm/croft and my children want to build a home on my land, can they apply for a loan?
Provided the house site has its own title, in their name, completely separate from the rest of the farm/croft then it should be possible to obtain a mortgage and therefore a loan could be considered, subject to meeting all of the other relevant criteria. However, risk exists in relation to house sites surrounded by land in the ownership of family members/relatives or which has been gifted. You should seek independent financial/mortgage advice as this can affect any post completion mortgage finance. You may require a title indemnity. Please discuss this with your solicitor.
I want to build a log cabin, can I apply for a loan?
Yes, provided that you can demonstrate that you can obtain post completion mortgage finance and subject to meeting all of the other relevant criteria. This is the same for any building which is considered non-traditional construction. That said, because this is a niche market, it is unlikely that you would be able to obtain self-build finance within the mainstream mortgage market, as post completion finance for non-traditional construction is very limited within Scotland.
I want to build a house on the site of my camp site, caravan park, farm or business can I apply for a loan?
Yes, but only if the title to the house site has its own title separate from the main site and it is to be your sole and only home, i.e. you do not own a home elsewhere and you meet all the remaining criteria of the Self Build Loan Fund. If this is not the case, then you would need to seek commercial finance as opposed to a domestic mortgage.
I want to build a house on the site of my camp site, caravan park, farm or other business for a caretaker/manager, can I apply for a loan?
No. The loan fund is only available to domestic residential owners, not to support commercial purposes.
I want to build a house in order to run bed and breakfast accommodation?
No. The loan fund is only available to domestic residential owners, not to support commercial purposes. You may find that you require a commercial mortgage to operate bed & breakfast accommodation.
I am retired, can I apply?
Yes, provided that you meet all of the other relevant criteria and are able to secure a mortgage upon completion of your build. You must, however, be able to secure post completion mortgage finance and life insurance. You should seek independent financial advice as the range of mortgage products available diminishes upon reaching retirement age.
Is there a maximum build cost?
At the present time there no maximum build cost, however we will require details on your construction costs in order to gauge the final equity in your property post completion. If you are undertaking some of the work, we will need to understand the value of this time as well as the duration i.e. number of hours of your time as this may have a significant bearing on the delivery of your project.
I have started building, but I have run out of money to complete my home, can I apply?
Yes. Provided you meet all of the criteria and supply satisfactory supporting information in relation to the inspection and certification of your build to date.
What is the minimum amount of money I can borrow?
The minimum sum is £30,000, as below this level you will not be able to secure a mortgage to repay the loan.