Mortgage on land only?

[worldwidewebs]

We're looking to do another build and am trying to work out how best to finance it, so I need a little advice

 

The timeline we're looking at is that we want to buy a plot, then sell our main home and then build the new house with the proceeds of the sale while living in rented accommodation. The equity in the house will ultimately cover the cost of the land and the build.

 

The issue I've come up against so far when discussing this with our current lender (Melton Mowbray) is that they want to lend based on the cost of the entire build and on that basis our income is insufficient. What they're essentially saying is that we would have 2 mortgages (our current one and the one for the build) and won't take into consideration the fact that we won't start building until our home is sold.

 

So what I need is someone to lend just on the land, which would have at least OPP. Any ideas?

[Andrew]

Can you increase the lending on your current home to cover the cost of the land? If so this will probably be the quickest, easiest and cheapest way to do it.

 

I remember having a similar conversation with the Melton when trying to purchase our plot. In the end we got a home owner loan secured on our house at the time from our current lender, which we used to purchase the land. Later on we sold that house, paid off the mortgage + the homeowner loan, and are using the rest of the equity + savings to get started. We moved into rented which is roughly the same monthly cost as the old mortgage and I worried we may have trouble getting a self build mortgage as we would be paying the rent + towards the end almost of the build the full mortgage (so the 2 mortgage scenario). As it happens the Ecology were absolutely fine with it and we have just secured the self build mortgage we need.

[worldwidewebs]

5 minutes ago, Andrew said:

Can you increase the lending on your current home to cover the cost of the land? If so this will probably be the quickest, easiest and cheapest way to do it.

 

Unfortunately, no. That was my first approach  

[Andrew]

37 minutes ago, worldwidewebs said:

 

Unfortunately, no. That was my first approach  

 
That’s a shame. Not sure then, but sadly don’t think it will be that easy. Good luck however.

[Mr Punter]

Can you remortgage your house with perhaps a buy-to-let?

 

In my experience lenders will not give much, if anything, for a plot with PP.  They want to see income to cover the repayments as there is lots of risk if you are highly leveraged.

 

If you have a decent income you can borrow money to buy something worthless as the lender will still get their money back.  Having to repossess an asset as the only way to get their money back is not the model they follow.

 

You can obviously sell your house first, but I guess you have a plot in mind and need to act quicker?