We've found a plot that currently doesn't have PP, but have agreed an offer subject to conditions. My solicitor has asked if I'll be taking out a mortgage and I'm unsure what the best course of action is.

 

We're selling out current home and will move into a rental. We will get £150K from the sale, with the plot costing £165K.  I calculate we'll have savings of around £65K by Sept. In addition, I have access to around £60K via another offset mortgage if needed (at a very low rate). I hope to keep build costs under £250K for a 4-bed dormer bungalow with basement (ICF + block/brick) and garage - but haven't crunched the numbers on this yet.

 

So if I buy the plot with cash, that'll mean I have access to £110K by September + £3K monthly savings thereafter. (The September date is a rough stab at how long it could take before work starts....although I question starting at that time of the year?? )

 

As I've typed this out, it looks to me that going via this route makes the most sense, rather than getting a self build mortgage straightaway. What do you think?

Having cash to fund the purchase is really good as is being able to save £3K a month.

 

I have not had a self build mortgage but do get commercial finance on some new build schemes and for them they prefer planning consent with pre-start conditions discharged as well as full costings.

 

It is worth finding out what the mortgage lender wants, but maybe leave it a while before you do a full application.  Your solicitor should be able to accommodate this later.

As with all financial transactions of this size I would seek professional advice before you decide , personally I would make sure all the finance require to finish the project was in place before plot purchase , it might be worth taking out a mortgage and only drawing down the minimum amount at the start just to get the lender tied in and guarantee future funds . wouldn’t want to get to the point of a ½ build house and find you cant finance the rest.

2 minutes ago, Buzz said:

As with all financial transactions of this size I would seek professional advice before you decide , personally I would make sure all the finance require to finish the project was in place before plot purchase , it might be worth taking out a mortgage and only drawing down the minimum amount at the start just to get the lender tied in and guarantee future funds . wouldn’t want to get to the point of a ½ build house and find you cant finance the rest.

I'm in a similar position and have been told by a very good friend a mortgage broker that DO NOT  start any construction work NONE without getting the mortgage first (you don't have to draw it all down)  he has seen alot of refusals from banks for partially completed builds,. Buying the site and getting planning is fine as it is seen as a deposit but

4 minutes ago, Ronan 1 said:

I'm in a similar position and have been told by a very good friend a mortgage broker that DO NOT  start any construction work NONE without getting the mortgage first (you don't have to draw it all down)  he has seen alot of refusals from banks for partially completed builds,. Buying the site and getting planning is fine as it is seen as a deposit but

 

Great advice. I got into a pickle with my lender as we had a delay on selling another property so I renewed the mge on the one we were living in that was to be demolished.

 

Long story short, once we sold the other house and had money to start, our lender refused to permit any development so I had to persuade them to redeem the mge (using the equity released from the) & waive the repayment fee - all of this wiped out a big chunk of our build fund so we needed to get a self build with Ecology, who were great.

 

We didn't do anything until those funds were secured though - I should have drawn down a nominal sum (£10k) though to start the clock ticking on the redemption period with Ecology as we wrapped up the build in a year but spent the following year stuck on their fixed rate until we could mortgage with a high st lender at more competitive rates. 

Good points - I need to do some reading up on how the draw down works.