BuildLoan has introduced a short-term mortgage for customers who need to fund the construction of custom-built homes until they move in and sell their previous property.

The self and custom build finance specialist says the product – developed with Buckinghamshire Building Society – is designed to help clients who want to repay their self-build mortgage in full through the sale proceeds of their previous home.

It says three-year loans of up to £500,000 and up to 85% of build costs are available, with a current rate payable of 6%, a 2.5% product fee and no early repayment charges.

The firm says the loan gives self-build customers two years to build their new property and one year to sell their previous home and repay the mortgage, in comparison to a 12-month maximum term of a regulated bridging loan.

Funds are released in stages as the building work progresses, with all stages of release agreed at application and based on the cost of each stage of work, it adds.

The business says that staged payments are useful for self-build customers with less cash, or for those using a building system such as timber frame, which may require a large up-front payment.

It adds the product does not require interim valuations, which cuts out the risk of a fall in valuation.

BuildLoan head of product development and underwriting Chris Martin says: “Most current self and custom build mortgage deals aren’t available to clients who have a shorter-term need for finance.

“Many self-builders want to stay in their current home while they complete their self-build project and will then repay their mortgage in full. This product takes away the pressure of having to repay a bridging loan within a year, which for many people is unrealistic or too risky.”Buckinghamshire Building Society head of mortgage sales Claire Askham adds: “We’ve designed this product specifically for clients who know they won’t need a long-term mortgage but do need time to make sure their self or custom build home is built exactly how they want it.“At the same time they can sell their previous home, without having to accept a low offer to achieve a quick sale.“To help them afford to borrow what they need to build their home, the mortgage will be arranged on an interest-only basis for the three-year term as we know it will be repaid at that point.”