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Funding a Self Build after maxing out on Mortgage..?


Matt5100
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Hello all,

 

First Post!!

 

My girlfriend and I have our properties on the market, with the mortgage in principle and our equity we are looking at a sum of  £600k very max. with almost 50% deposit.

 

I have found a beautiful 6 acre plot in a rural location.  It has a basic structure (an old small barn) which is being used as present accommodation for the current owners and it has all utilities.  I must emphasise this is very basic and small but could do for a year! 

 

The plot has PP and the footings are complete.  I don’t fully agree with the house design that was submitted, but the foot print is suitable, it’s just the first floor we want to change.

 

This is such a beautiful spot and I would love to grab it!

 

However the plot is funnily enough £600k!

 

I even have my doubts the bank will agree to this for the mortgage in principle.  Does anyone have any experience with this?

 

Also.. we need money to build the house, maybe another 350k…  I am in no doubt that once complete, with properties to compare with in the area, we would be looking at a final property of between 1.5 - 2 million.  This is for our forever home though and we are not looking to profit from the development.

 

How on earth can we source the additional funding?  Parents can’t help, are there some sorts of loans  instead of a mortgage that would allow for the final build and then…?! I have no experience at this!

 

I have a reasonable salary and my GF has an ok salary, the amount we could borrow with mortgage in principle was the most for our salaries combined.

 

I have about £70k in shares, but am not willing to sell due to the hammering they have had this year, if I wait a couple of years I’m hoping they will be double if not more once they have recovered.  So my shares are a no go at the moment.

 

We just have no more equity..

 

Is it possible, or are we dreaming?

 

 

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Sounds fantastic, however to be realistic which I am hoping is helpful. Thats just not realistic. You've maxed out on the plot...which at that point means as you know there is no money left to do anything as you're mortgaged to hilt with that. 

 

Keep looking and get something that will be achievable with your budget. 

 

I'd recommend  doing a proper budget to build a house you like and then work from costs there to find a plot.

 

Best of luck. 

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Walk away 

 

Unless you’re inside the M25 and need to stay there, then plots at £600k - even with that land - are very rarely worth it. 
 

In all likelihood your foundations will have to come out and start again as you’ll most likely need a warranty for the mortgage company and they will probably not accept the current ones as they have no idea how they have been installed. 
 

 

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Welcome Matt. You don't say where the plot is, but if you think similarly sized properties would be worth 1.5 to 2 million then I'd wager it will cost far more than £350k to build. You both work (and will presumably need to continue to do so to service a mortgage) so you're going to have to pay someone else to build it if you want to be in in a year. Depending on the size and spec you're probably looking at between £1,500 and £2,500 per m2 to build. Even at the low end £350k gets you something not much more than 200m2. Even in 6 acres, that would need to be somewhere VERY desirable to be worth £1.5 million plus.

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I would speak to a planning consultant. Aks if there is any chance of getting planning permission for two or more houses. If there is a good chance then buy and split the land selling off the bit you arent living in. No CGT if it's part of our main residence you are selling off.

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As hinted at above, I'd revisit your "buy plot for £600K, build for £350K, valued at £1.5M+" figures. if this was the case, then much more experienced developers would be all over it. How long has the plot been on the market?

 

I also suspect your MIP is on a £600K house - don't assume the bank will automatically lend you £300K for a plot of land when you have no means of building a house.

 

As to your core question on how to get additional funds - with you having no access to any collateral, then a bank is unlikely to lend you the money to complete the build. And, even if they did consider it, they'd be looking for proof that you can build for £350K. Getting planning for multiple dwellings and buying and splitting is your best option. Again though, unless you've found this plot and other developers have not, I suspect this will already have been looked at.

 

 

Edited by AliMcLeod
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Welcome!

 

Very sound advice above.

 

We looked at, and walked away from quite a few plots that we 'fell in love with' - it is not easy and you can get caught up in the excitement - a hard nose is required.

 

6 acre is huge for a single dwelling and a modest house on that size plot would be a tricky sell subsequently. Also, that's a lot of land to landscape and maintain.

 

We eventually built in SE England (East Berkshire J8/9) on a 1/2 acre plot that had an existing but knackered dwelling on it (so full services) on a mature street in a nice part of town. We bought it and moved in 2011 for £675k with big dreams, however we only really had £250k build budget (which itself was dependent on selling our original house which we had re-mortgaged and rented out) and it was quickly clear that it was nowhere near enough.

 

We had some subsequent good fortune and finally sold the house which enabled us to proceed with the build, but for a year or two we were stuck and it was not pleasant. Developers had previously had several cracks at multi dwellings but failed so doubtful we would have been any more successful.

 

In late 2015 we finally were able to get started having had 3 round of planning and some tap dancing on the mortgage - our finished property is just under 400m2 and we spent around £1500/m2, bit more if you include all the final landscaping. Involved living on site in a caravan for 18 months and doing all the PM and really sweating the budget.

 

While it was valued at an impressive £1.2M back in 2017, that represents more or less what we spent on it (plot + build) so no profit, not that we were looking for one. We still have a sizeable mortgage to work off over the next 10 years also.

 

You're in a very good position though for future opportunities.

 

Get those properties sold, rent somewhere cheap and start doing your homework on build costs, what you're prepared to contribute aside from money (time, etc) and be open minded in your searching location - dilapidated properties in good areas are often overlooked by developers as too niche but can be the best starting position for self builders as you usually have all the expensive bits like services and access already established. Ideally try and find somewhere that you're happy living in for the foreseeable but with an eye on resale (so not too quirky) should you need to.

 

I won't presume what stage of life you're at but keep in mind that even when you have a plot, things often take a lot longer than you expect (we had a LOT of zig zags) and life needs to go on while you build - living in a barn for a year might be tolerable but what if it's 3 years? Our kids were just starting at junior school when we moved in and went into senior school just as we were finishing :)

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