Equity release to buy plot

[guest]

Hi - I have found a plot but am struggling to find the funds to buy it... We currently have approximately £260k equity in our current house with a pretty small mortgage. The plot is approx. £100k and what we would like to do is to remortgage our current house to release equity to buy the plot (still leaving £160k-ish equity in the property), giving an LTV of around 50%.  We would then try and sell our house before beginning construction of the self build - we don't want to start building, then having the stress of hoping our house sells..

My current lender (and several others that I have asked) say they won't consider allowing me to do this. I don't understand why as if I default on the mortgage, they still 'win' and the amount borrowed would still be less than what we borrowed originally to buy the place!

 

Before starting construction I would sign up for a self build mortgage to cover the later stages of the build. (I would hope to have enough cash left from the sale of our current house to get the new build wind and watertight before needing to draw down on the self build mortgage)

 

Does anyone know of a lender who would allow equity release to buy a plot?

 

Thanks. 

Edited December 17, 2019 by guest

[BotusBuild]

I was in a slightly different situation in that I had no mortgage on the current house. We have ended up remortgaging current house to purchase out plot and have about £50K to get started on the build.

Our new mortgage is with Metro Bank. Buildstore Mortgage Services brokered the deal

Edited December 17, 2019 by BotusBuild

[scottishjohn]

24 minutes ago, guest said:

Hi - I have found a plot but am struggling to find the funds to buy it... We currently have approximately £260k equity in our current house with a pretty small mortgage. The plot is approx. £100k and what we would like to do is to remortgage our current house to release equity to buy the plot (still leaving £160k-ish equity in the property), giving an LTV of around 50%.  We would then try and sell our house before beginning construction of the self build - we don't want to start building, then having the stress of hoping our house sells..

My current lender (and several others that I have asked) say they won't consider allowing me to do this. I don't understand why as if I default on the mortgage, they still 'win' and the amount borrowed would still be less than what we borrowed originally to buy the place!

 

Before starting construction I would sign up for a self build mortgage to cover the later stages of the build. (I would hope to have enough cash left from the sale of our current house to get the new build wind and watertight before needing to draw down on the self build mortgage)

 

Does anyone know of a lender who would allow equity release to buy a plot?

 

Thanks. 

so if your house sells --where you going to live,if new house not even started?

would your plot seller allow you to take an option on the plot  for a fee?--which you loose if you do not complete in the agreed  time 

 I know i would and  will if i am getting the price i want for a plot 

Edited December 17, 2019 by scottishjohn

[Roundtuit]

1 hour ago, guest said:

... remortgage our current house to release equity to buy the plot (still leaving £160k-ish equity in the property), giving an LTV of around 50%.  We would then try and sell our house before beginning construction of the self build - we don't want to start building, then having the stress of hoping our house sells.

 

We did exactly that.  When we re-mortgaged to release the cash for the plot, we didn't tell new lender what our plans were (to be fair, they didn't ask), so it was a straight-forward residential re-mortgage deal for them.  I suspect many high-street lenders won't be keen to lend if they know you're intending to sell imminently.  As it turned out, due to re-visiting the planning process and a slow housing market, it was a couple of years before we sold so didn't get hit for redemption penalties either.  We then rented somewhere to live whilst we built.

[guest]

2 hours ago, scottishjohn said:

so if your house sells --where you going to live,if new house not even started?

Hi - we have friends who move abroad Oct-Apr and leave their house empty here! They are happy for us to stay there when they are away. During spring/summer, there is plenty of space for a static caravan + we have relatives nearby with spare rooms. 

 

An option might work, will have a look into it. 

[Stewpot]

In my experience, dealing directly with a lender can be a problem. A good broker is worth his (or her) weight in gold. The broker will act as a go-between between you and the lender, and if he is worth his salt, then he will take your side and help you with the best approach to the lender. He will also know about specialist lenders, ones whose lending criteria are suitable, and ones you never get to hear about otherwise.

[Bozza]

We also did / currently doing exactly what you want to do.  We went for an interest only mortgage to keep monthly payments down.  Santander via Buildstore to buy the plot.  Then self build mortgage from Ecology to build the house.

 

If you sell currrent home before new one is built, simply rent in interim if you don’t fancy living in a caravan 

[guest]

Thanks Bozza. Were Santander easy enough to remortgage with (as in: were they concerned about what you were spending the money on)?

[Bozza]

12 minutes ago, guest said:

Thanks Bozza. Were Santander easy enough to remortgage with (as in: were they concerned about what you were spending the money on)?

 

I’ll pm you.

 

 

 

[Temp]

I'm wondering if the problem is your use of the term "equity release" rather than "remortgage" ? These days "equity release" has come to be associated with an interest free mortgage/annuity package to give you income in old age. You might have more luck if you stick with remortgsge? Just a thought.

 

[guest]

Hi, I only use the term here to make it easier to explain what a I want to try and do. Only spoke about remortgage to the bank. 

[Tonymac01]

If you are setting up a self build mortgage, I’d use them for the ‘early stage’ of build rather than the ‘late stage’ 

from what I can tell it’s hard to get a self build mortgage if you e already started. 

[ykhan16]

Hi, we kind of had a fairly similar issue. A plot came up but even with our savings we were short on funds to buy it so we had to get money from the equity held in our house. We didnt remortgage to do this but applied to the lender for "Further borrowing" on the house. The lender did ask what we needed the money for and we told them it was to buy a plot. Then we just chose which product we wanted for the borrowed amount (2 year fixed) and keeping within the total LTV of the property.

 

All got sorted in a few weeks and now we have a mortgage comprising both the original product and the new product with both the repayments paid together.

 

Not really clear on the 2nd part of your plan- selling your home then starting the build. In my case I am planning to go through build store to get a self build mortgage. As I own the land outright that should make things easier as I should be able to get a mortgage that pays in advance so we can stay in our current home whilst the new one is built.