Guide
What a lender will require on a self build
Updated
If any part of the project is borrowed, the lender becomes a second party with a view on your insurance, and its requirements are usually stricter than your own instincts. Knowing them early prevents a stage payment being held up.
Talk to a specialist Five covers, the moment each has to exist, and the two that cannot be fixed once the build has started.
Why the warranty is the hard requirement
Lenders take security over a house they may one day need to sell. A newly built home without a recognised structural warranty is materially harder to sell and to mortgage onward, so most lenders will simply require one.
Because a warranty must be arranged before construction, this requirement reaches backwards into your programme. It is the clearest case in self building where an insurance decision has to be made before a spade goes in the ground.
Stage payments and evidence of cover
Self build lending typically releases funds against stages, and each release is a checkpoint where evidence can be requested: works cover in force, liability cover in place, the warranty inspection regime being followed.
Keep the certificates together and current. A stage payment delayed because a certificate expired is a cash flow problem entirely of paperwork's making.
Noting the lender's interest
Lenders will normally want their interest noted on the buildings policy at completion. It is administrative, it is free, and it is the sort of thing that surfaces at the worst moment if left.
Ask your broker to do it at inception rather than in response to a solicitor's enquiry.
Who you are dealing with
Insurance for a self build is usually placed through a broker, and brokers arranging insurance are regulated. Check any firm on the FCA's Financial Services Register before sharing documents or paying a premium.
Where a policy is arranged by an authorised firm, the Financial Ombudsman Service and the Financial Services Compensation Scheme may be available to you, which is a genuine protection and one of the better reasons to use a regulated intermediary rather than an unregulated introducer offering a cheaper premium.