Broker Query

[andyr87]

Hi all, 

 

first post so be gentle and apologies if this topic has been covered elsewhere on the forum!

 

We have spent the last couple of years obtaining planning and a building warrant for our timber frame self build project in Argyll and Bute in Scotland. 

 

We are at the stage of getting in quotes from various contractors, however it is becoming clear that we will likely be required to borrow slightly more than originally envisaged. After a few evenings crushing my way through spreadsheets, I have concluded that we can comfortably afford to borrow what I think we will need (now that we have formal quotes) including 10% contingency. We are fortunate enough to own the land outright, so are able to use that as a deposit. 

 

However when I approached my broker about this I was told that the lender would only lend a maximum of £300k regardless of circumstance, which is short of what we need. 

 

So we cast our net a little further and have started liaising with another broker who specialises in self builds. The good news is that they have a few lenders who will lend us what we need. The bad news is that the broker charges 1% of the amount borrowed for their service. 

 

Now its not black and white as they offer additional services, such as assistance with site insurance, life insurance, warranties, post completion mortgage etc which are all included in this fee. I will admit that they give a good sales pitch and the quality of correspondence and speed of response so far has been very good. 

My question to the forum (if you are still reading) is - have any of you had any experience with a company like this and ultimately is it worth the cost? I would hope that given the high fee they would be able to negotiate better interest deals than I would which would perhaps offset the up front cost of employing the broker in the first place. As budget is tight (when is it never tight?) I want to ensure that all expenditure represents value and I will admit that the thought of having someone else deal with all of the bureaucracy of applying for the mortgage and staged payments appealing. 

Thanks - A

[recoveringbuilder]

I can’t comment on how things are done now however when we were going to build our first house and having trouble finding a mortgage we went to a broker who eventually came up with a lender willing to finance our build, he also wanted a percentage of what we wanted to borrow and having never had a mortgage before we felt a bit uncomfortable with it.

We consulted our solicitor with the proposal and he wouldn’t let us touch it, said we shouldn’t have to pay to get the mortgage so of course we left it alone.

[Jeremy Harris]

Welcome.

 

There is a bit of a problem with a shortage of brokers who operate in the self-build mortgage sector, and the fact that the biggest player in that market, Buildstore, tends to be pretty expensive.  Our experience was that Buildstore was also expensive and very slow.  They do offer a range of additional services, though, like site insurance (which you can get direct without paying the Buildstore markup) and a warranty.

 

The Ecology Building Society are very good, and offer self-build mortgages, but only if the build meets their environmental standards.  I'm also not sure if they offer mortgages North of the border.  Our experience with the Ecology was very good indeed, and I'd not hesitate to recommend them.

 

I'd suggest shopping around yet again, rather than accept any offer where the fee was a percentage of the amount borrowed.  As @Christine Walker has mentioned, the idea of paying such a fee seems unreasonable.

[andyr87]

@JSHarris and @Christine Walker thanks for the response. 

I was on the Ecology website recently, not sure if we would meet their standards - we have planned for an ASPH and budgeted in an MVHR system, our insulation is above regulation, but not top of the range spec. I will give them a call nonetheless!

 

I haven't read of many positive experiences on this forum regarding buildstore - our own experience with them wasn't great. They gave it a good pitch at the trade show we met them at, however found them very difficult to get ahold of and unwilling to provide ball park figures unless you paid them a fee. The other broker we liaised with recently (Custom Build Funding) were easier to speak to and have given us best and worst case scenarios regarding amount borrowed, terms, interest rates etc. So far they have been great, I just have a bee in my bonnet about the nominal fee. 

 

Out of interest how time consuming / difficult is it to make the initial application and subsequent staged applications yourself? 

[Ralph]

Hi Andy, 

 

We're going through this at the moment, currently talking to Buildstore and as @JSHarris writes they do seem expensive although we've not had problems with the amount you can borrow, it seems to be like any other lender, based on your income etc. Some people have not had the best experience with them but I have heard from people who were happy.

 

You are quite limited with who will lend for a selfbuild in Scotland. We've had one lender pull their initial offer of a mortgage once we moved to 100% clad timber frame. They were ok when about 30% was breeze block skin.

 

The other place we are going to look at is https://www.scottishbs.co.uk/

 

[Jeremy Harris]

4 minutes ago, andyr87 said:

Out of interest how time consuming / difficult is it to make the initial application and subsequent staged applications yourself? 

 

I've only got experience from the Ecology, and they were very easy to deal with.  We didn't have a staged release, as Ecology just let us have all the money upfront, but it wasn't for the whole build cost, only a relatively small part of it.

[andyr87]

5 minutes ago, Ralph said:

The other place we are going to look at is https://www.scottishbs.co.uk/

 

@RalphUnfortunately this was the lender who capped the amount available to borrow and requested a 10% cash contingency. 

 

@JSHarris just off the phone to Ecology. We are a few bits of insulation short of the requirement energy rating, however they advised that we speak to the architect to slightly increase the insulation (or alternative solution) and redo the SAP calculation then we would be eligible as they do provide mortgages in Scotland. 

 

Thanks for the feedback so far - should have joined this forum years ago!!!

[Ralph]

Just now, andyr87 said:

@RalphUnfortunately this was the lender who capped the amount available to borrow and requested a 10% cash contingency. 

 

I think Buildstore are asking for the same to be honest. It's certainly down in their build cost spreadsheet.

[andyr87]

1 hour ago, JSHarris said:

 

I've only got experience from the Ecology, and they were very easy to deal with.  We didn't have a staged release, as Ecology just let us have all the money upfront, but it wasn't for the whole build cost, only a relatively small part of it.

 

@JSHarris Just out of curiosity how much did Ecology roughly charge in fees and how long did the consultation period take (between first call and money in the bank)? I have been in touch with our energy consultant who has advised that the alterations to our project would be minimal to achieve the criteria for Ecology. They seem to get praise elsewhere in the forum so would be keen to investigate them further if we are eligible. 

 

Thanks in advance ?

[Jeremy Harris]

Ecology were pretty quick, around four weeks from start to finish, IIRC.  The longest part of the process was getting the plot valuation, which took around a week to sort out.  The fees were £300 for the valuation plus £995 for the set up fee, but this was in 2014, so they may well have changed since then.

[Alex C]

I found Ecology very easy to deal with and were also the cheapest by far as the fee is so low. I decided I would rather spend 4k upgrading the spec of my house to meet their criteria than spending 4k on a fee for a broker. I had a lot of equity so they let me have access to all of the funds as and when I wanted it so just drew it down each time I had a big bill in. I made sure I took my first drawing on day 1 though just to get the 2 year mortgage period ticking so I could remortgage to a lower rate asap.

[Bitpipe]

+1 for Ecology. We had to use them at short notice when our original lender refused to support our demo & rebuild plan. Really lovely to deal with.

 

By way of example, we found our own surveyor and they refunded the difference in cost directly to us.

 

Some observations (from 2015/16 may have changed) :

• The environmental lending criteria is based on your predicted SAP / PHPP performance. However any energy efficient discount does not kick in until you have your final SAP / Passive Haus certificate. So you can plan to hit a certain SAP (and get funds) and if you don't achieve it there is no real consequence apart from loosing the rate discount for the remaining period of the mge. As it was we got SAP A (just) but never bothered with PH certification even though we would have met the criteria - money saved for the remaining year did not justify the cert fees.
• Ecology don't do staging, you can have all the money in one lump or take what you need as you need it. A simple email was all it took to release funds.
• If I did it again, I'd have transferred a nominal £5k to start the clock on the repayment  - as it was we used savings for the first phase and only started drawing down late in basement construction  - we though we were being clever in minimising interest  but penny dropped that we had a year on the redemption to run post completion before we could move to a standard retail mge.

 

 

[epsilonGreedy]

4 hours ago, andyr87 said:

Now its not black and white as they offer additional services, such as assistance with site insurance, life insurance, warranties, post completion mortgage etc which are all included in this fee.
 

 

Call me a cynic but I interpret that as "once they have secured a mortgage for you they will then attempt to cross-sell other related financial products".

[nod]

The amount your builder is charging is such a small amount compared to what some of the brokers are charging 

We didn’t have a mortgage But if we had the Ecology route would sit much better Even if the charges where the same I suspect you would get a far better service than from a broker 

[newhome]

27 minutes ago, epsilonGreedy said:

 

Call me a cynic but I interpret that as "once they have secured a mortgage for you they will then attempt to cross-sell other related financial products".

 

I think that’s probably right. Anyway all of the other things they list should be easy enough to arrange direct. 

[Thedreamer]

I would ditch the broker.

 

Your limited in Scotland and even more for Highlands and Islands.

 

We went with the Scottish Building Society the amount we could borrow was not huge but will result in the mortgage being low.

 

If this was not feasible we would probably have revised the design (smaller, less complex) and invested to ensured our SAP met the ecology lending criteria. 

 

I'm at first fix stage on a self build on our croft on Skye. I keep a blog here that might be of some interest.

 

 

 

Edited July 19, 2019 by Thedreamer

[Ralph]

2 hours ago, Bitpipe said:

Ecology don't do staging, you can have all the money in one lump or take what you need as you need it. A simple email was all it took to release funds.

Are you sure that's correct? My understanding was that while they don't do staging based on the usual foundations, weather tight etc the money is still released only as a percentage of the value of the build as it progresses.

[Bitpipe]

3 hours ago, Ralph said:

Are you sure that's correct? My understanding was that while they don't do staging based on the usual foundations, weather tight etc the money is still released only as a percentage of the value of the build as it progresses.

 

I can only speak from experience. I agreed a loan of £400k. When the basement was nearing completion and the savings were running out, I emailed them and they put £200k in my build bank account (not via solicitor).

 

No-one came to visit, no documents sent, no conversation at all in fact.

 

I then drew down the remaining balance in two £100k instalments as I needed them, again with just a short email saying 'send me the money'.

[Jeremy Harris]

Ours was the same, they just paid the whole lot in one go.

[Ralph]

16 hours ago, Bitpipe said:

I can only speak from experience. I agreed a loan of £400k. When the basement was nearing completion and the savings were running out, I emailed them and they put £200k in my build bank account (not via solicitor).

 

16 hours ago, JSHarris said:

Ours was the same, they just paid the whole lot in one go.

 

Wow,  that would solve my issue of a potential large early cost for foundations and kit. I will investigate further. 

[Bitpipe]

9 minutes ago, Ralph said:

 

 

Wow,  that would solve my issue of a potential large early cost for foundations and kit. I will investigate further. 

 

And remember that it's your design that is evaluated for compliance to their criteria - once you have the money you can build to what standard you want I suppose - you just wont get the post completion discount for the remaining term. However, given that's likely to be a year or less then it's a simple ROI calculation.

[andyr87]

Thanks all for the feedback. Certainly gave me plenty to think about. 

 

I liaised with my SAP man who has advised putting up some solar PV panels to increase the SAP rating to allow us to meet Ecology's criteria. As @Alex C mentioned, £4k on an upgrade is better value than spending £4k on a broker. Just need to do some research on Solar PV now...

 

From what you have advised regarding how Ecology work, it sounds like we would also save on solicitor fees and surveyor fees too? Whats the catch?

[jack]

7 minutes ago, andyr87 said:

I liaised with my SAP man who has advised putting up some solar PV panels to increase the SAP rating to allow us to meet Ecology's criteria. As @Alex C mentioned, £4k on an upgrade is better value than spending £4k on a broker. Just need to do some research on Solar PV now...

 

PV is great if you can afford it.

In addition, have a look at shower waste water recovery units. They're possibly one of the cheapest ways of getting a few SAP points.

[Bitpipe]

3 minutes ago, jack said:

 

PV is great if you can afford it.

In addition, have a look at shower waste water recovery units. They're possibly one of the cheapest ways of getting a few SAP points.

 

I'll say it again - it costs nothing to put SAP friendly elements in your design and pre-build analysis to get the mortgage approval from Ecology (other than the SAP consultant's time if you're using one).

 

They DO NOT require you to follow through with them, however if you don't achieve the expected SAP requirement then you miss out on their post build discount for the remaining term of the mortgage.

 

It's then a budgetary decision as your build progresses and you can weigh up the relative install costs vs mge discount impact.

[jack]

1 minute ago, Bitpipe said:

It's then a budgetary decision as your build progresses and you can weigh up the relative install costs vs mge discount impact.

 

... vs remortgaging with another lender after completion.