Using land as a deposit?

[SteamyTea]

Is it just me or does it seems a small plot to put a £200,000 build on.

3 hours ago, BrettW said:

 

 

 

[BrettW]

4 minutes ago, SteamyTea said:

Is it just me or does it seems a small plot to put a £200,000 build on.

 

 

That circle is super rough. It’s actually 10.5m by 30m plot.

 

Cheers

[BrettW]

You can see a very early draft example (THIS ISNT THE HOUSE WE ARE PLANNING, PURELY BOILERPLATE 4 BEDROOM DETACHED DWELLING TO SHOW THE NEIGHBOUR ) ..

 

Brett

 

 

Edited July 22, 2019 by BrettW

[Ferdinand]

This looks like a good project, with a number of potholes on the way.

 

My brief comments

 

1 - Get a formal valuation at the point of gift. It is a matter of judgement whether to maximise or minimise this within justifiable guidelines, depending on your parents’ estate size and if they are in their last 7 years. Logic probably says minimise and get the uplift in your name. Will really help with all kinds of future conversations with authorities.

 

2 - You may be shocked by the access bill. Case law says it can reasonably be a third of the uplift it generates in the value of the plot.So begin recording irrefutably everything you spend, so in theory expenses can be deducted. But he may just alight on a price, and in a sellers market of one you are probably a little powerless. Grin and bear it.

 

3 - Get used to holding a poker face and reflecting before reacting, even if someone says they are going to insert a porcupine in your posterior, backwards. The pause to think, and keeping stum, are really critical skills.

 

4 - Talking about land as a deposit is confusing. I would suggest ‘equity’ is a better word. Their are BSs out there that will treat it just the same. Try Penrith for one. 

 

Ferdinand

Edited July 22, 2019 by Ferdinand

[BrettW]

Thanks @Ferdinand great advice!

Glad you see it as a possible/positive project, i appreciate its access thats key right now..

Yep planner made us aware about it being a third of the uplift plot value, curious to know more about expenses though? What kind of expenses can be 'included' right now ive paid around £270 in getting a planner round and a quick sketch as above...keen to not go for planning until we know we have access, would an agreement with the neighbour be a conditional agreement? 

Thanks again
Brett

[Ferdinand]

42 minutes ago, BrettW said:

Yep planner made us aware about it being a third of the uplift plot value, curious to know more about expenses though? What kind of expenses can be 'included' right now ive paid around £270 in getting a planner round and a quick sketch as above...keen to not go for planning until we know we have access, would an agreement with the neighbour be a conditional agreement? 

 

Sounds like you need to apply a little cost-control to your planner, or at least some discipline. Unless there is a hefty copyright fee or something else in that £270. £270 should be the best part of a day for a normal Plannign Consultant, and that plan did not take a day (imo).

 

Whatever you negotiate and he accepts.

 

It would be reasonable to include eg survey costs, valuer costs, legal costs as things to count against the uplift imo.

 

If you ask your legal advisers they may have a schedule of normal practice. Just do not put yourself in the position where there are things on the list you cannot prove.

 

Again, the agreement is what you negotiate, though without PP there would be no uplift so a conditional agreement is likely. 

If you get him to accept a fixed price offer, then you make a judgement call based on your estimate of what you can achieve vs what he wants.

 

You also need to check just in case you already have prescriptive access for what you need to do down that route. 

eg if you have the right to drive down it then potentially services could go the other way and you may just need to say "I'm building this house and wanted to let you know I will be building a drive", rather than "I accept I may need to cross your palm with silver."

 

The sort of games you can play are to get agreement for access to a rear entrance to the existing for say a garage, or something that only applies to one PP and do it in 2 jumps with a small uplift first, or carefully worded such that it covers the both. But that would be sharp-elbowed, and not a good thing to do to neighbours.

 

For all of that you want a local recommended property type experienced solicitor who should have all the agreement boilerplate in their computer, and will be a great help. Look at local firms with one to perhaps five branches who have several partners and someone specialising in property. If you get up to a regional firm with a corporate car park in the local city your wallet will definitely know about it.

 

I always say that for a recommendation ask a qualified professional surveyor ideally a RICS at your established local estate agent. You want to talk to the hoariest old git in the back office - the one who looks either heavily stressed like Captain Pugwash with a pepper-and-salt beard and 6 unwashed cups of tea on the desk, or the one who looks relaxed and extremely well-lunched. But in any case the one who has been there for 15 years or more.

 

F

Edited July 22, 2019 by Ferdinand

[BrettW]

10 minutes ago, Ferdinand said:

Sounds like you need to apply a little cost-control to your planner, or at least some discipline. Unless there is a hefty copyright fee or something else in that £270. £270 should be the best part of a day for a normal Plannign Consultant, and that plan did not take a day (imo).

I should clarify, ive paid £140 + VAT (£168) for the planner to come to the plot, give his opinion, create a full report with research and his viewpoint (thinks planning permission is achievable) 

And ive spent £100 for my architect (whos also a friend) to do that plan plus he's helped on a few other bits...

Cheers

Brett

[Amateur bob]

9 hours ago, andyr87 said:

Hello. 

 

You will still need to borrow £200k regardless if that is what it is going to cost to build. The bank will use the land as for security should there be any issues with the build. They way to think about it is that you are spending £200k on the build, the land is worth £100k so the minimum value at completion is £300k (hopefully more). So you are spending £200k on an asset worth £300k. 

 

The Halifax won't lend to you as the land was gifted. I believe it is a rule introduced to stop people from building in their parents gardens. 

 

We are in a similar situation and have been speaking to various brokers / banks. Not sure where your project is based, but the Scottish Building Society will lend up to £300k and will give you 60% of the value of the land as your initial stage payment which you will be given before you start. However note that they require you to have 10% cash contingency and require proof that you have that. 

 

We have opened up dialogue with Ecology Building Society (see previous topic https://forum.buildhub.org.uk/topic/10588-broker-query/) and the feedback seems to be pretty good as it sounds like you can bypass the broker and do the application yourself. The caveat is that you have to have have a SAP rating of 85 or above for the design to get the more favorable interest rates, which arguably isn't difficult on a new build especially if you are aware of this before you start the design process.

Note that they lend on the basis that the design achieves the SAP rating to achieve a the lower interest rate. I believe that you can revert to a lower SAP rating as the build progresses however you will pay a higher rate of interest. As mentioned we have only just started these discussions so I may be wrong on that one! 

 

The maximum any lender will give you is 4 times your income, or joint income if you are going into this with a partner. 

 

Regardless you are in a fantastic position by owning the land outright as the bank will view you as less of a risk to lend to. We have been though the mill a bit recently with regards to finding the right mortgage for us however are beginning to see light at the end of the tunnel thanks to the feedback from members on this forum. 

 

will the scottish building society lend a bit more than the 4x couples salary? i too have a plot gifted and 100k cash in my current house, i would need to borrow 130-150 kish to do the build i reckon but 4 x salary multiple will only come to 120k i could be 30k short and thats with no contingency, is it likely that with having plot outright and 100k cash upfront they might lend me 5x instead of 4x?

[Amateur bob]

19 hours ago, ragg987 said:

The value increases as build progresses. And the lender will not want to risk lending above the value at any given point.

 

If the lender is willing to lend to 75% of value at any given point (this is illustrative not definitive), then at pp the value is 100k so they lend 75k. Next stage costs 100k so you use the 75k plus your own 25k and the value increases, so they loan another 75k at this point. Etc.

 

Point is they will not lend over the value so you always have to put your own money in.

i too have a plot gifted and 100k cash in my current house, i would need to borrow 130-150 kish to do the build i reckon but 4 x salary multiple will only come to 120k i could be 30k short and thats with no contingency, is it likely that with having plot outright and 100k cash upfront they might lend me 5x instead of 4x?

[BrettW]

16 minutes ago, Amateur bob said:

i too have a plot gifted and 100k cash in my current house, i would need to borrow 130-150 kish to do the build i reckon but 4 x salary multiple will only come to 120k i could be 30k short and thats with no contingency, is it likely that with having plot outright and 100k cash upfront they might lend me 5x instead of 4x?

 

4 x would work for us I think, in standard residential mortgages they maybe go up to 4.5 times, not heard of 5 times sadly...

[ToughButterCup]

2 hours ago, BrettW said:

[...]
And ive spent £100 for my architect (whos also a friend) to do that plan plus he's helped on a few other bits...

[...]

 

For me, that rings loud warning bells.

What we all need is  properly detached professional judgement. That is always clouded by friendship. 

[BrettW]

8 minutes ago, AnonymousBosch said:

 

For me, that rings loud warning bells.

What we all need is  properly detached professional judgement. That is always clouded by friendship. 

 

The planner I’ve never met in my life...he was the most positive about it all.

 

Brett

[Amateur bob]

On 22/07/2019 at 08:50, andyr87 said:

Hello. 

 

You will still need to borrow £200k regardless if that is what it is going to cost to build. The bank will use the land as for security should there be any issues with the build. They way to think about it is that you are spending £200k on the build, the land is worth £100k so the minimum value at completion is £300k (hopefully more). So you are spending £200k on an asset worth £300k. 

 

The Halifax won't lend to you as the land was gifted. I believe it is a rule introduced to stop people from building in their parents gardens. 

 

We are in a similar situation and have been speaking to various brokers / banks. Not sure where your project is based, but the Scottish Building Society will lend up to £300k and will give you 60% of the value of the land as your initial stage payment which you will be given before you start. However note that they require you to have 10% cash contingency and require proof that you have that. 

 

We have opened up dialogue with Ecology Building Society (see previous topic https://forum.buildhub.org.uk/topic/10588-broker-query/) and the feedback seems to be pretty good as it sounds like you can bypass the broker and do the application yourself. The caveat is that you have to have have a SAP rating of 85 or above for the design to get the more favorable interest rates, which arguably isn't difficult on a new build especially if you are aware of this before you start the design process.

Note that they lend on the basis that the design achieves the SAP rating to achieve a the lower interest rate. I believe that you can revert to a lower SAP rating as the build progresses however you will pay a higher rate of interest. As mentioned we have only just started these discussions so I may be wrong on that one! 

 

The maximum any lender will give you is 4 times your income, or joint income if you are going into this with a partner. 

 

Regardless you are in a fantastic position by owning the land outright as the bank will view you as less of a risk to lend to. We have been though the mill a bit recently with regards to finding the right mortgage for us however are beginning to see light at the end of the tunnel thanks to the feedback from members on this forum. 

 

who did you end up going with for your mortgage in the end? cheers