Advance stage payment mortgages involve working out and splitting the cost of the land and the various stages of the building work an, with the money, up to 95 percent of the cost of land and build, being released at the start of each stage, with no money held back until completion of the build.

The addition of the land purchase makes for an extra stage in the build process when compared to an arrears stage mortgage and an extra interim stage is also often added for the wind & watertight protection, giving the following 6 stages:

Purchase of land
Preliminary costs and foundations
Wall plate level
Wind & watertight
First fix & plastering
Second fix to completion

The obvious advantage of this type of loan over an arrears stage payment mortgage is that the borrower has positive cash flow from the outset, as well as there being no quibbles about finding funding for the purchase of the land.

The positive cash flow makes the building process easier and quicker, as the labour and materials can easily be paid for when needed. There is also the advantage of not having to organise and wait for any interim valuations, as the lending is based on cost not on value. However, the lender still needs protection, so advance stage payment mortgages usually include a short-term valuation guarantee policy to protect the lender for the amount of money it has lent. The cost of such as policy is not that high - usually no more than the £200 or so that would otherwise have to be paid out for interim valuations with an arrears stage payment mortgage. This means that assuming there is no difference in interest rates, then there is little or no cost for having a positive cash flow.

Many people, particular those with young families, are put off building their own home by the thought of having to move out of their existing property and rent, stay with family, or even have to live on site in a caravan during the course of construction. It is not only the inconvenience of having to move but also the cost of doing so - the cost of moving twice, the cost of having to store furniture and it will generally cost more per month to pay rent than current mortgage payments. But with an arrears stage payment mortgage, it is almost always possible to stay in your own home, provided that you can afford to pay back this loan as well as your existing mortgage.

One of the biggest problems for would be builders is having the necessary cash flow to fund the building of the project, particularly if they have had to come up with the capital needed to acquire the land. But this problem is totally erased with arrears stage payment mortgages. The fact that this type of mortgage is much more suited to the way self-build is carried out means that they are likely to gain pre-eminence in the market place over arrears stage payment mortgages over the course of the next few years.