Need some advice

[MatthewB1993]

Hiya,

Looking some advice on self build mortgages. I currently own my house (no mortgage) worth roughly £150k. I am considering a self build.

If (estimated figures) I want to purchase land (£80k) and build a 2500sq ft house (£250k at £100/sq foot) - while living in my current house until the self build is complete before selling. What is the best way to work this finance wise?

Is the only way to mortgage the full cost of the self build and then once complete put the sale cost of my current house into the self build mortgage to pay it off a good bit.

2 other quick questions. What is the process of getting finance in the overall scheme of self building. ie. How would I know how much to self build mortgage without getting plans done and constructions companies to tender and submit proposals first?

Also, would the land need to be purchased first and not included in a self build mortgage or would a self build mortgage also cover the land.

Would appreciate all advice.

[epsilonGreedy]

You aspirations look unrealistic because you want to build £500k home with £150k equity plus mortgage while living in your present house. Answers to the questions below might help others suggest a viable plan.

1. Do you need to maintain a roof over a family during the self build period?
2. What is the square footage of your current house?
3. How many people will live in your finished self build?
4. Do you have a full time job?
5. Is there an option to extend your current house?

There are few areas of the UK where £80k will buy a plot large enough for an executive 2500 sq ft house.

 

p.s. The industry works on ££ per square meter

[Jilly]

A few thoughts:

Buy the land with some kind of loan for the value of the land as it stands. I'm not sure if this is possible, but you might be able to get finance on the land to buy it for the price it has been valued at (ie before any building works). 

Take a lodger in your main house to pay for it.

Depending how finances are, try to pay for planning and other permissions/investigations etc etc out of your wages/income.

When all is in place, remortgage your £150K house to finance the build and hope to get to a place where the house is habitable and then move in and DIY the last bits to avoid over mortgaging yourself.

Or rein in your plans and build a small house with plans to extend when you have recovered financially.

If you are certain of your sums, and Brexit does not affect house prices,  you may be able to get another mortgage part way through the build, but unless you have a high income, or have a guarantor, you may struggle to borrow more.

Alternatively, get a let to buy mortgage on your £150K house, and rent it out, so this pays the mortgage and live on site in a static. 

 

I am in no way qualified to give financial advice, but I am cautious! 

 

[Mr Punter]

That is quite an imbalance between land cost and build cost, which at less than £1000 per metre is very low.

 

You should be able to borrow 4 times your income up to a max of 75% of the finished house value.  If you borrow on your current house this will be factored in.  With a self build mortgage this will be released in stages, often n arrears.  If you can't comfortably make the mortgage payments from your employment income you will run into financial problems.

[MatthewB1993]

Should note I am in Northern Ireland.

[Conor]

Sell your current house and rent for a year while you build. Get a self build mortgage with a high LTV (e.g. 80% from ecology) and make sure you've always enough cash for the next stage, so you are never totally dependent on the next draw down. That's exactly what we're doing. Yes, renting for a year will cost us about £9k, but it's giving us access to £80k cash that will mean we have over 50% of the build budget in the bank, will always have a buffer during the build.

 

(I'm in NI as well, and all of the local banks were pretty much useless, so we went with Ecology)

Edited October 10, 2019 by Conor

[Conor]

24 minutes ago, Mr Punter said:

That is quite an imbalance between land cost and build cost, which at less than £1000 per metre is very low.

 

That's actually pretty reasonable and typical for Northern Ireland. Land, labour and quarry materials are far cheaper than in rest of UK (e.g. I got a quote for pump suitable concrete at £60 per cube). I'm budgeting £1k/m² as well but aiming to come in lower.

[MatthewB1993]

Cheers Conor! Did you mortgage the land too or buy it first?

[Conor]

2 minutes ago, MatthewB1993 said:

Cheers Conor! Did you mortgage the land too or buy it first?

 

We're in a strange enough scenario... We bought a house to renovate but it just needed too much work. So we currently have a residential mortgage on it. In order to knock and rebuild, we needed a self build mortgage. The only company that would offer us an 80% LTV on the site (luckily the site cleared with FPP is worth same as what we paid for the house) was ecology. They'll then pay out in stages as the build progresses. Only NI bank that would do similar was first trust... But only offers 50% LTV.

 

Where are you building? I can highly recommend FMK architecture in Ahoghill if you don't yet have an architect.

[MatthewB1993]

I am in the extremely early stages. I own outright our current house. We know we want to build but wrapping my head round everything is a bit mind boggling - in terms of the steps and the finance options we have available.

[Bitpipe]

12 minutes ago, MatthewB1993 said:

I am in the extremely early stages. I own outright our current house. We know we want to build but wrapping my head round everything is a bit mind boggling - in terms of the steps and the finance options we have available.

 

We lived on site in a caravan - bit of a cliche but our total accommodation costs over 18 months were £1100 (as we sold it on after). You'll need power and water on site initially anyway to facilitate the works so you'd just need to get your sewage solution in early. Buy a container for site and store your stuff in that (take steps to manage humidity etc), sell it after. 

 

It's not an ideal living situation but perfectly manageable and means you can sell your house up front and have cash in hand to get rolling. You're also on site which increases security and keeps you very connected to the build (even if you're not doing that much).

 

If you want to move from one nice house into another with no inconvenience then that is always an option but you to be able to fund it.

 

So I guess what I'm saying is 

 

1) find a site and secure it (probably with a loan)

2) make site habitable, sell house and clear land purchase loan

3) use remaining equity to underpin a self build mortgage, which post build you will swap for a traditional residential mortgage.

 

Edited October 10, 2019 by Bitpipe

[dpmiller]

@MatthewB1993 we were in a similar position. We bought the land outright off savings, and remortgaged the current spot for enough to (hopefully) get us habitable. We'll then sell and then regroup for completion. That's the plan anyway...

[Bozza]

I’m in similar position.  I remortgaged current home on part interest only/part repayment basis, to purchase plot (Santander).   Ecology mortgage for self build.  Won’t repeat other comments but would add a few observations. 

 

1.  Cost of self build = plot + new house + everything else (fees, services, loan cost, landscaping, driveway, insurance,  contingency etc etc.  Allow min £30k for last bit you will spend it.

 

2.  Would agree about considering renting as an option.   Sound move if you can get a plot with pp and are using a quick build method.

 

for the record Ecology have been excellent with me.

Edited October 10, 2019 by Bozza

[Declan52]

Ulster Bank where/are the main player in the self build mortgage market here but when they actually offer these types of mortgages is anyone's guess. They are in and out and back in so it's just pot luck with them. The progressive and bank of Ireland would be your other 2 to call in and see if they have any literature you could read about rates, fees etc.

Best option would be to sell up bank the money and move in with family if that's an option or rent. Once you have got your plot buy a caravan and put it on site and move in.

Then the rest is really up to you. 

I used all my cash to get to roof level then got a mortgage from the Ulster Bank to finish the rest. 

You will have cash reserves so it just depends how much of your own money you want to spend before you spend the banks. 

So site first, then plans then permission. Site might have outline planning consent so this could effect what you can build. Then you can go and get tenders done and will give you a rough cost of what you will need to borrow. 

Where abouts in NI are you looking to build???

[dpmiller]

Local mortgage consultant did the rounds for us and put us smoothly into a remortgage deal with Virgin, and again last month into another 2-yr deal. Again with Virgin, and no hoops to jump through.

Didn't really look into the selfbuild side of things too closely but you could do worse than give NiMortgages a call.