Hi, so a bit of a chicken and egg dilemma, hoping someone can offer some clearer advice.

 

My OH and I are hoping to build a house in the next 3—5 years, we're at the very beginning of the process and just trying to wrap our heads around what financing options are available to buy land and build the house to establish whether the idea is even viable.

 

A few facts...

• We own our current house, made various improvements since buying it 5 years ago (kitchen extension, loft conversion etc.) and have about £300k equity in it based on current market value
• We have savings of about £50k
• Our joint household income is £295k

 

As you can see, we currently only have £50k in cash savings so obviously not enough to buy land if we were to find some. In terms of self-build mortgages however, everything i've read suggests lenders would need to see detailed budgets and drawings before considering an application...

 

"In order to progress your application you'll need to provide plans and a breakdown of the potential build cost."

https://www.homebuilding.co.uk/advice/self-build-mortgage

 

So my question is, how can you provide such detailed information like drawings and build costs when you haven't even found land yet, let alone commissioned architects to start designing the house?!

 

Given the financial facts i've given above, what would be the smartest way to go about financing the land purchase?

 

Thanks

 

 

 

Welcome.

 

It would help to know which area you are in, and what you think your land and build budget will need to be approx.

 

Usually plans relate to a specific plot, so you identify the plot first. There may be an idea of what is needed in a house, or even a detailed spec, but the design would usually be done in relation to a plot. "Breakdown of Potential Cost" does not have to mean very detailed. Even when you start building with detailed plans and permission, a 10-15% or more variance is very possible.

 

My suggestion would be save to the max, and by the time you have found something you like you may well have saved most of what you need on that income. Unless you are thinking about a significantly expensive project.

 

You will have been able to save 80k tax free in 8 months from now just with ISAs, unless I have missed something.

 

Ferdinand

 

Edited September 23, 20206 yr by Ferdinand

10 hours ago, Ferdinand said:

It would help to know which area you are in, and what you think your land and build budget will need to be approx.

 

We currently live in London and hope to remain in the South East (Hertfordshire, Buckinghamshire, Oxfordshire, Bedfordshire, Suffolk, Essex)... we're aiming to narrow these areas down to specific town's and villages in a single county in the next few months before searching for land. 

 

Having done some rudimentary calculations our land budget looks to be about £350k and our build budget around £650k. 

 

10 hours ago, Ferdinand said:

Usually plans relate to a specific plot, so you identify the plot first. There may be an idea of what is needed in a house, or even a detailed spec, but the design would usually be done in relation to a plot. "Breakdown of Potential Cost" does not have to mean very detailed.

 

So you mean it's possible to apply for a land purchase mortgage with nothing more than a rough breakdown of what we want in a house and the associated costs? Like you say a house can't be designed until you know the land it's being built on (hence the chicken and egg dilemma).

 

10 hours ago, Ferdinand said:

My suggestion would be save to the max, and by the time you have found something you like you may well have saved most of what you need on that income. Unless you are thinking about a significantly expensive project. You will have been able to save 80k tax free in 8 months from now just with ISAs, unless I have missed something.

 

£80k in 8 months... not only is £10k a month a huge and possibly inconceivable amount, it would then take us about 3 years to save the required cash to purchase a £350k plot of land.

 

If we were to entertain an aggressive savings plan, would a financial advisor be the best person to help us plan a savings strategy?

 

Other than saving the cash ourselves should we want to purchase land sooner than 3 years, what other financing options are available to us? Could we release equity in our current house for example? For clarity we bought the house for £415k, have paid off about £50k and through the improvements we've made it is now worth around £650—£700k.

 

Any other means?

 

 

 

Edited September 24, 20206 yr by bpk101

How about release the equity in your current house or it to buy some land for your £350k, assuming you can cover the extra mortgage repayments.

 

Now you own the land, develop with the existing planning permission or go back to planning with changes.

 

When planning granted and ready to start work, sell your house and move to rental accomadation during the build or caravan on site

 

With a combined income of £295k your borrowing power will be huge and you can get a decent self build mortgage to pay for the build.

You could remortgage your house for 80% of the £650 value but you would only have £205 taking savings into account.

 

You could sell and rent which would give you £325 after costs including savings.

2 minutes ago, Moonshine said:

How about release the equity in your current house or it to buy some land for your £350k, assuming you can cover the extra mortgage repayments.

 

They currently have £365 outstanding on a house worth £650 so there is not enough equity to borrow more than an extra £155 if they go to 80%

12 minutes ago, Mr Punter said:

 

They currently have £365 outstanding on a house worth £650 so there is not enough equity to borrow more than an extra £155 if they go to 80%

 

 

Ah missed that bit.

 

Sell the house, move to rental acomm while buying land and developing?

@bpk101

 

Let me revisit my initial post, and try and be a bit more careful / analytical.

 

The points I wanted to make were:

 

1 - I don't think "detailed" needs to be quite as detailed as I inferred you are thinking. The self-build article you link just says "plans". And plans and a cost breakdown can be a two pager, or a 50 page document and a huge spreadsheet.

 

It may be helpful for others to weigh in with what they used. 

 

2 - On the sequencing, the plot you find will probably have a big impact on your final house. Some people do have a design and precise layout in mind that they sort of fly-inn to whatever plot they find (or look for a plot to fit it on), but you can usually get a better result by doing the design for the plot., so many more have a concept or a list of "needs" in their head. Plans can be drawn up - especially an initial stab at the plans - quite quickly.

 

3 - On the finance, yes some people have finance against land. Others get a self-build mortgage on land with PP, and often plots being sold will have a PP in place, so that could potentially give you some of the material you need. Or you can offer subject to getting PP and have a lockout period. There are many routes.

 

Another way is to buy something dilapidated but mortgageable with a mortgage, and then demolish and replace, which is also a way of sequencing the process.

 

It is a very varied area. Various suggestions already are on the thread, and people have done all of these. 

 

4 - On savings I was noting that by the time you find your plot which could be 6 months to 2 years, with such a household income you could substantially change the circumstances you list.

 

My "80k in 8 months" point was that that is how much you can put into tax sheltered savings in the short term just using ISAs (2 x 20k allowance this FY and start of next). Though ISA is tax free on the way out not the way in.

 

I would always suggest an aggressive savings strategy, as self-building is a risky and expensive process and on a large project 100k of extra costs can appear out of a hole in the ground, literally and metaphorically.

 

This is not the place to overanalyse incomes, but I estimate that if you took out 10k a month from after tax income there is still double the London median household income left. But it all depends on irreducible outgoings, which is too far to go here - I am really making a challenge to think on.

 

Hope that clarifies

 

Ferdinand

 

Edited September 24, 20206 yr by Ferdinand

1 hour ago, Ferdinand said:

@bpk101

 

Another way is to buy something dilapidated but mortgageable with a mortgage, and then demolish and replace, which is also a way of sequencing the process.

 

 

Exactly what we, and many others here located in the SE have done.

 

Plots are very hard to find, if they are decent then they find their way to developers quickly so the ones you see are often overpriced or 'difficult' (need significant groundwork to be usable, have services running across them that need moved, difficult access, restricted development potential etc...) . Once you have a plot you then need to fund access and services (min water,  power & telecoms, optional gas and mains sewage) before you can even start the build. The cost of these can be prohibitive (£50k+), even if you're near other dwellings.

 

Existing 'tired' houses are much easier to find. They don't need to be complete wrecks, just something that is in a good location, decent plot and not likely to be missed if flattened and replaced. They already have access and services. You can usually live in them while you plan their replacement (50% footprint increase or greater if you design well) and also get a feel for the location, aspect etc and what will work as a dwelling - area ceiling costs etc. You can then decamp to rented or better a static on site while you do the actual build.

 

Sale market I good so you may have no issues disposing of your current dwelling. Back in 2011 when we did our move we remortgaged the 'old' house with BTL and rented it out and used the equity to get the 'new' house which we lived in for 3 years until planning was secured and the old house was sold (our build fund). Then moved to static in the garden and commenced the build, moving back in a year later.

 

Just watch that if you have a mge on a property you plan to demolish then the lender must give you permission and approve what you're doing - don't risk not telling them as if they find out (takes one disgruntled neighbour) then they will consider you in default and make you redeem. Ours said no, then yes, then no so we used the majority of the build fund to pay it off and took out a self build mge from Ecology. Ended up in the same place financially more or less.

9 hours ago, Ferdinand said:

@bpk101

 

Another way is to buy something dilapidated but mortgageable with a mortgage, and then demolish and replace, which is also a way of sequencing the process.

 

7 hours ago, Bitpipe said:

 

Exactly what we, and many others here located in the SE have done.

 

 

This definitely sounds like a viable option to explore. In fact one of my favourite architect companies says on their website:

 

"The majority of our projects are on sites where we are demolishing an existing house. In many ways, this makes life easier, as the principle of development is already established."

 

Our dream is to build a modern / contemporary style home of approx. 300 sqm. (to help illustrate the style of house we have in mind i'll add a few images to the post).

 

Question being, if we are hoping to build something like this (and i appreciate it's not to everyone's taste) does it have a bearing on what style and size of 'dilapidated' house we look for? Meaning does the house we demolish need to be of a similar style and size to begin with? In other words, how do we make an informed decision on a house purchase without knowing if we'll be able to build what we hoped for after buying it?

 

My fear would be that we sell our current house, buy the dilapidated house and live in it for a few years, then start the design and planning process only to have our plans fail to get permission leaving us stuck with an old house we need to sell so we can move on and start the process all over again.

 

Is this a likely scenario and if so, how do we avoid it?

 

 

 

 

 

2 hours ago, bpk101 said:

Our dream is to build a modern / contemporary style home of approx. 300 sqm. (to help illustrate the style of house we have in mind i'll add a few images to the post).

 

Question being, if we are hoping to build something like this (and i appreciate it's not to everyone's taste) does it have a bearing on what style and size of 'dilapidated' house we look for? Meaning does the house we demolish need to be of a similar style and size to begin with? In other words, how do we make an informed decision on a house purchase without knowing if we'll be able to build what we hoped for after buying it?

 

My fear would be that we sell our current house, buy the dilapidated house and live in it for a few years, then start the design and planning process only to have our plans fail to get permission leaving us stuck with an old house we need to sell so we can move on and start the process all over again.

 

Is this a likely scenario and if so, how do we avoid it?

 

 

That is a fantastic question, which I don't think we have discussed in detail before in one place.

 

I have a couple of suggestions but can I suggest that you start a new thread something like "How can I select a site suitable for a modern selfbuild?" in the "Building Plots, Land and Renovation Properties" section. Hopefully it will become a resource thread.

 

I will comment on the new thread.

Edited September 24, 20206 yr by Ferdinand

On 24/09/2020 at 21:38, bpk101 said:

Question being, if we are hoping to build something like this (and i appreciate it's not to everyone's taste) does it have a bearing on what style and size of 'dilapidated' house we look for? Meaning does the house we demolish need to be of a similar style and size to begin with? In other words, how do we make an informed decision on a house purchase without knowing if we'll be able to build what we hoped for after buying it?

 

My fear would be that we sell our current house, buy the dilapidated house and live in it for a few years, then start the design and planning process only to have our plans fail to get permission leaving us stuck with an old house we need to sell so we can move on and start the process all over again.

 

Is this a likely scenario and if so, how do we avoid it?

Unless you're in a conservation area or ANOB etc then you should be fine. You will have to make a judgement call on the houses/plots you visit to see how established and uniform the street scene is.

 

We purchased a 50's red brick detached in-between two nearly identical versions. Rest of street is a bit of a mix.

 

We got planning for a contemporary white rendered house about 3 times the footprint (ok, 1/3 underground in form of basement).

 

Neighbours objected but planners did not care that much, we had to compromise on a few features but that's all part of the process.

 

Hi bpk101,

Great architect house reference !

I must say £650k for 300m2 is too optimistic if you want to hire award winning RIBA architect. You should budget at least £3k/sqm + 20% on top to cover the fee for professionals. (architect, SE, M&E planning consultant etc)

 

I wanted to stay in London, so I looked the particular area on Google map satellite view and spotted a few opportunities for the land, and luckly ended up buying the garages site directly from the land owner.

 

This auction site is good one to look at if you are looking for in South East.

https://www.cliveemson.co.uk/properties/

 

Good luck.

 

 

23 hours ago, Tony C said:

I must say £650k for 300m2 is too optimistic if you want to hire award winning RIBA architect. You should budget at least £3k/sqm + 20% on top to cover the fee for professionals. (architect, SE, M&E planning consultant etc)

 

 

 

Yes i agree, these reference images are just for inspiration, i'm confident we can build something 'in the style of' for £650k with a good architect, we may need to compromise on size and location of course and be mindful of materials and finishes. 

 

The top image is by an architect company in the UK whose build's start at £3.5k per sqm! 

 

However the fourth image down has a 'contract value' listed as £750k on the architects website.

 

What does 'contract value' actually stand for by the way, is this the total cost to design and build?

 

Edited September 28, 20206 yr by bpk101

56 minutes ago, bpk101 said:

What does 'contract value' actually stand for by the way, is this the total cost to design and build?

 

"Contact value" is usually the build cost, the contract sum total to the contractor. Usually all the professional fees (%) are based on this figure.

You need to budget this and +20% on top (if the contract value is £750k then £150k) for the architect, structural engineer, M&E, QS, building control, planning fee, party wall fee.

Some of the modern one-off houses cost far more to build than the final value and are considered niche.  Have a good look around for existing ones and I think you could save a lot of hassle and money.

 

Here are a couple.  I can't vouch for the locations.  Probably remote but crime ridden.

 

https://www.themodernhouse.com/sales-list/valeside/

https://www.themodernhouse.com/sales-list/the-saltings/

4 hours ago, bpk101 said:

 

Yes i agree, these reference images are just for inspiration, i'm confident we can build something 'in the style of' for £650k with a good architect, we may need to compromise on size and location of course and be mindful of materials and finishes. 

 

The top image is by an architect company in the UK whose build's start at £3.5k per sqm! 

 

However the fourth image down has a 'contract value' listed as £750k on the architects website.

 

What does 'contract value' actually stand for by the way, is this the total cost to design and build?

 

 

In praise of you taking the trouble to sweat the detail.

 

You will have a fantastic house but more grey hairs.

On 28/09/2020 at 19:11, Mr Punter said:

Have a good look around for existing ones and I think you could save a lot of hassle and money.

 

I spend a lot of time on Modern House actually, along with some other sites like WowHaus. In a way that's sort of been our plan B really... to buy something already there. But it's just not the same as being a part of the creation of something new and designed as you want it. 

 

On 28/09/2020 at 19:11, Mr Punter said:

Some of the modern one-off houses cost far more to build than the final value and are considered niche.

 

This is something i'm becoming more and more conscious of as i dig deeper into the research.

I'd always imagined (and even heard) building your own home would cost less than its final value, it was just the long and hard graft that put more people off from doing it. 

 

There's a funny article i can across about a house designed by Ström Architects, the article opens by proudly boasting how the couple bought a run down bungalow for £400,000, knocked it down and built a new house that's now worth £1million. It later goes on to explain the new house cost £750,000 to build which means they're actually £150,000 in the red!

 

Well i'm not sure what to do with this new found knowledge, you only live once and we've always dreamed of living in a certain style of house. Do we compromise and build something less niche with more resale potential in case we need to downsize later in life. Or go for it guns blazing (with a fixed budget of course) and just enjoy it regardless of what it might be worth later on?

 

It's a tough call. 

You really need the site first before engaging anyone in any meaningful way, different sites will have different opportunities and constraints so if you've got a particular style/size in mind, that will drive your plot selection...

I could recommend an architect to you who can deliver a similar style to what you're after but not sure what his estimates of m2 costs are... you can dm me if you want.

2 hours ago, bpk101 said:

 

I spend a lot of time on Modern House actually, along with some other sites like WowHaus. In a way that's sort of been our plan B really... to buy something already there. But it's just not the same as being a part of the creation of something new and designed as you want it. 

 

 

This is something i'm becoming more and more conscious of as i dig deeper into the research.

I'd always imagined (and even heard) building your own home would cost less than its final value, it was just the long and hard graft that put more people off from doing it. 

 

There's a funny article i can across about a house designed by Ström Architects, the article opens by proudly boasting how the couple bought a run down bungalow for £400,000, knocked it down and built a new house that's now worth £1million. It later goes on to explain the new house cost £750,000 to build which means they're actually £150,000 in the red!

 

Well i'm not sure what to do with this new found knowledge, you only live once and we've always dreamed of living in a certain style of house. Do we compromise and build something less niche with more resale potential in case we need to downsize later in life. Or go for it guns blazing (with a fixed budget of course) and just enjoy it regardless of what it might be worth later on?

 

It's a tough call. 

 

I completely understand your sentiments with wanting to make your mark / build a dream architectural masterpiece but it very rarely profitable.  If it was, the big developers would be doing it all the time.

 

I think you can get much better value from an already built project, especially if it is recent and has no obvious issues (road noise, flood risk, crap neighbourhood etc).

 

To make money you need to look at the likes of @nod who is an experienced contractor, works hard (as does his partner), and expects the same of those who work for them.  Probably not your dream house but they know what people want.

 

Also try not to wait too long.  I see so many people who eventually get their "dream home" and it is too late.  Kids have left and they are rattling round in a big box.  Lots of old gits on here and you don't need to be one of them / us.

12 hours ago, Mr Punter said:

To make money you need to look at the likes of @nod who is an experienced contractor

 

Thanks i'll take a look... 

However i wouldn't say we were in this to make money, it's not a business venture but a chance to build ourselves a beautiful, architectural home we can enjoy for years to come. My only concern about resale value would be if something regretful happened later in life that meant we had to sell it. I wouldn't be comfortable putting my family in a situation where we end up in financial hardship by this idea of a self-build. But at the same time i don't want to regret later in life that we never did it... or live our days out in a house we're not happy in. 

 

I've been speaking with an architect this week called John Pardey who considers our potential £1.2m (£500k land / £700k design and build) budget very viable and thinks we can achieve a comfortable 3 bed, 250sqm modern house along the lines of other projects his studio has designed (images of which are attached).

 

Now when i look at The Modern House, there's comparable properties (size and a modern style) selling in excess of £1.5m, for example:

 

https://www.themodernhouse.com/sales-list/highfield/

https://www.themodernhouse.com/sales-list/the-rossdale-house-ii/

https://www.themodernhouse.com/sales-list/west-beach/

https://www.themodernhouse.com/sales-list/the-tree-house-ii/

 

I'm not sure how quickly these houses sell but they DO sell. With that in mind am i really taking a huge risk with this venture and potentially jeopardising my family's future financial wellbeing?

 

12 hours ago, Mr Punter said:

Also try not to wait too long.  I see so many people who eventually get their "dream home" and it is too late.  Kids have left and they are rattling round in a big box. 

 

I definitely hear that, whilst i'm no spring chicken at 45... my OH is 38 and our (first) child is 14 months. If we succeed in completing a home in 5 years (my 50th) i've still got 15–20 years of enjoying a 'family house' and hopefully 10+ years afterwards if they don't run me into the ground first. 

 

 

 

Edited October 1, 20206 yr by bpk101

13 hours ago, Mr Punter said:

 

I completely understand your sentiments with wanting to make your mark / build a dream architectural masterpiece but it very rarely profitable.  If it was, the big developers would be doing it all the time.

 

I think you can get much better value from an already built project, especially if it is recent and has no obvious issues (road noise, flood risk, crap neighbourhood etc).

 

To make money you need to look at the likes of @nod who is an experienced contractor, works hard (as does his partner), and expects the same of those who work for them.  Probably not your dream house but they know what people want.

 

Also try not to wait too long.  I see so many people who eventually get their "dream home" and it is too late.  Kids have left and they are rattling round in a big box.  Lots of old gits on here and you don't need to be one of them / us.

 

That last point is important.

 

I currently live in somebody else's probable dream home, and it's not perfect but it is probably 85% of what I would like, and did the job very well when I moved here with my 7x mum, in that it is central in town, in a quiet lane, and sufficiently well-built to be practical, though nowhere near PH.

 

The people who were here before bought in 2005, and took until 2010/11 to convert, then we bought it for less than what we think they spent overall. In 2013. They downsized to a 2 bed bungalow as the grown up kids were not visiting as much, and spent the next years completely reversing the plan of *that*. I don't understand.

 

It comes back to the process you are doing, which gives you enough time to think through your priorities / plans and find a balance.

 

F

 

Edited October 1, 20206 yr by Ferdinand