Self build finance options

[puntloos]

So as I understand it I'm in a fairly unique situation:
 

1/ Wanting to build my own house (welcome to the specials.. ghost town..) 

2/ Owning a crappy old house + plot outright (no mortgage left)

 

As I understand from a financial advisor, 99% of self build mortgages are basically some concept of transferring over your current mortgage, or only doing an extension, and while they have found a mortgage with 4% fixed rate for the lender's part (but still variable on the bae and/or sonia side) there are a lot of fees that do drive up the final price substantially. At the end of the day the proposed fees on top of the mortgage amount to another 3.5% of the full amount. (but these are one-off fees such as valuation, broker fee, to be clear)

 

How come builder loans are so expensive? Or am I looking in the wrong place?

[Big Jimbo]

I think you will have some options if you have a job, or some income. If you dont, regardless off the fact that you own the house and the plot you will be looking at some form of commercial lending. If you have no track record, that will narrow it down. Borrowing money on a commercial basis is going to cost you a lot more money than a nice self build mortgage.

[dpmiller]

what's the current place worth? Could you re-mortgage it to fund some or all of the build? That's the direction we went.

[puntloos]

 

 

8 hours ago, Big Jimbo said:

I think you will have some options if you have a job, or some income. If you dont, regardless off the fact that you own the house and the plot you will be looking at some form of commercial lending. If you have no track record, that will narrow it down. Borrowing money on a commercial basis is going to cost you a lot more money than a nice self build mortgage.

Both of us employed well, fulltime, at a reasonable income (we should easily be able to afford a mortgage)

10 minutes ago, dpmiller said:

what's the current place worth? Could you re-mortgage it to fund some or all of the build? That's the direction we went.

 

Yes, the current place's value - "on zoopla" is worth much more than we expect the build to cost, but of course that is plot+house, and the idea is to knock that house down which doesn't tend to please lenders.

 

But we really only need perhaps half of the build cost as a loan  for comfort reasons.. 

[dpmiller]

Ahhh... Gotcha. I didn't read the knock-down bit in the OP.

[matthyde83]

Give Marc Gibbs from Mayflower Mortgage Brokers a call.  I have found him amazing with self build options.  Just about to complete on our self build mortgage (mid-build)

[SBMS]

I think you should be able to get a simple self build mortgage, just because you own the plot doesn’t preclude you - it’s probably viewed more favourably by the lender as your LTV would be much lower. We borrowed to purchase plot and build house. That will be calculated as part of your equity and therefore your deposit. 
 

What I would imagine is that most lenders won’t lend for the site preliminary costs which demolition might be included under but it sounds like you can fund (and prove you can fund) that portion. Is there a reason you’ve been told a commercial loan is required?

[puntloos]

Here's a quote I received. Rounding numbers a bit and comparing with a similar sized mortgage, in 2019

 

- 500K Loan
- 2022 3.89% builder mortgage with a fixed rate for the lender, but still dependent on the BAE - so really variable IMO

- 2019 1.99% standard mortgage fixed for 5 years

 

	Build, variable	Standard,fixed
Lender fee	£6,000.00	£1,500.00
Valuation	£2,100.00	£750.00
Reinspection	£2,700.00
Redemption	£75.00	£75.00
Release Deed	£50.00	£50.00
Booking Fee	£300.00
Brokers Fee	£5,000.00
			Difference
	£16,300.00	£2,370.00	£13,900.00

 

I'm aware I'm comparing apples and oranges.. pre covid post covid too..  but

 

Is 14,000 fair given the complexity and unusualness of the mortgage? A bunch of fees that come up, and an additional broker fee of 5000 (The broker gets about 2500 from the lender as finders fee already, so total fee 7500!) And why are there suddenly two valuations that are 2-3x the price of the valuation for the standard mortgage? (especially given the valuation surely should take into account they are really just valuating a plot of land? Seems easier?)

 

Is this quite out there or is this simply the cost of building? Can someone talk me through if the above is somewhat reasonable or if I'm being ripped off?

 

Separate question - since this quote is from one mortgage broker, is it acceptable to shop around (ask other mortgage brokers) or do brokers demand that you either go with them or cancel the work and start over? Im certainly tempted to e.g. chat to @matthyde83's guy, or buildstore, but I don't want to unfairly play people off against eachother.

Edited June 15, 2022 by puntloos

[Mr Punter]

I tend to really shop around for money, although I have used one broker for several deals recently.  You can go with whoever offers the best deal.  It is not as if you have signed an exclusivity agreement with the broker.  Valuations and fees really add a lot to the costs.  You will have done in £15k before you set foot on site.

 

 

[puntloos]

56 minutes ago, Mr Punter said:

I tend to really shop around for money, although I have used one broker for several deals recently.  You can go with whoever offers the best deal. It is not as if you have signed an exclusivity agreement with the broker.  Valuations and fees really add a lot to the costs.  You will have done in £15k before you set foot on site.

I called buildstore and they seemed to want me to finish my deal with the current broker before they would talk to me. I didn't leave my name so I'm not sure if they would find out but is there some ethical concern with shopping around? Or why would they ask this..

 

Of course I suppose that if they reach out to the same lender this lender might put 2 and 2 together, but would that be a problem for me?

 

 

Edited June 15, 2022 by puntloos

[Buzz]

11 minutes ago, puntloos said:

I called buildstore and they seemed to want me to finish my deal with the current broker before they would talk to me. I didn't leave my name so I'm not sure if they would find out but is there some ethical concern with shopping around? Or why would they ask this..

 

Of course I suppose that if they reach out to the same lender this lender might put 2 and 2 together, but would that be a problem for me?

 

 

No harm in shopping around especially when there are a lot of fees attached , just took a quick look at ours and the broker fee was £495 to us for her to arrange the deal . 

[SuperJohnG]

I owed my plot prior to getting a welfare build mortgage but and used it as part of the LTV. 

 

I owned our current house outright but this wasn't included anywhere apart from ecology gave me the value of this house part if the self build mortgage on interest only but it wasn't tied in. 

 

I used ecology - only 500 fee and very very straightforward. All the other particularly build zone have horrific fees and not good to work with. A quick search on here and you'll find plenty of votes for ecology. 

[puntloos]

So I reached out to ecology, and I passed their initial checks, will have a proper call soon.

 

My question, I suppose stays roughly the same:

- What is the benefit of a mortgage advisor specialist vs self serve.

 

Is there simply no reason to have a specialist help, they just take your money and they add no huge benefit? Or are there situations in which case you'll be super glad you did shell out their fees? @matthyde83 what's your take on this? What did your guy do beyond 'reach out to lenders and ask them a rate, then collect a fee on top'? My understanding is that some lenders don't want to talk direct to consumer but ecology seems fairlly competitive at a glance

 

 

[matthyde83]

9 hours ago, puntloos said:

So I reached out to ecology, and I passed their initial checks, will have a proper call soon.

 

My question, I suppose stays roughly the same:

- What is the benefit of a mortgage advisor specialist vs self serve.

 

Is there simply no reason to have a specialist help, they just take your money and they add no huge benefit? Or are there situations in which case you'll be super glad you did shell out their fees? @matthyde83 what's your take on this? What did your guy do beyond 'reach out to lenders and ask them a rate, then collect a fee on top'? My understanding is that some lenders don't want to talk direct to consumer but ecology seems fairlly competitive at a glance

 

 

I understand the skepticism.  However I think it depends on the complexity, knowledge of the market, relationship with lenders etc.  Ours is not the simplest case and I’ve found having a broker invaluable.  Their fee in comparison to other things is tiny (at least the bit I am paying, obviously they get a fee from lender too) and so much work is done before they get anything.  I’ve been talking to them for about 8 months about the financing and pretty sure all I paid was £400 until another £400 at offer.  

[Thorfun]

11 hours ago, puntloos said:

So I reached out to ecology, and I passed their initial checks, will have a proper call soon.

 

My question, I suppose stays roughly the same:

- What is the benefit of a mortgage advisor specialist vs self serve.

 

Is there simply no reason to have a specialist help, they just take your money and they add no huge benefit? Or are there situations in which case you'll be super glad you did shell out their fees? @matthyde83 what's your take on this? What did your guy do beyond 'reach out to lenders and ask them a rate, then collect a fee on top'? My understanding is that some lenders don't want to talk direct to consumer but ecology seems fairlly competitive at a glance

 

 

I would suggest that they add nothing especially for the cost of £5k!! just go direct, if you're both in employment then it should be pretty straight forward. the reason for the extra interest rate and fees is due to the risk the lender is taking on a new build as if it all goes wrong they'll be left with a partially finished house.

 

when I was researching I found buildstore really expensive on the fees side and ended up having Handlesbanken referred to me by a friend who self-built and they've been great. Ecology were also on our list.

 

 

[Seren161]

The Broker or No Broker choice… I used Buildstore and I found them worth the additional expense. If self employed then Brokers are definitely worth the expense. If you and any other co-applicants are employed with easily demonstrable earnings within the required threshold for your borrowing then you can go it alone… It is important to note that it is still a way more involved and significantly lengthier  process than a regular mortgage and sometimes avoiding the one mistake or misrepresentation that dents your chances might be all your brokers cut pays for ..but that one mistake could mean funding or no funding…

[SBMS]

You could go direct if you’re good at scouring the market and finding the cheapest rates yourself and have a simple financial situation (full time employment, employed). 
 

If you deviate from this (self employed, company director etc) and have a more complex financial setup with regards your income sources I think a broker is highly valuable. For example, if you’re self employed/paid through dividends some lenders assess your income based on your  tax return income, others on net company profits. This could make a huge difference to what you can borrow and it’s very difficult to ascertain which lenders use which method without phoning them all up and asking. 
 

Secondly, I would recommend someone like buildstore if you’re looking for an advance stage self build mortgage as this mortgage requires an assessed build budget and these sort of brokers have an in house team that can help with this. 
 

All in all, I would say a broker is worth the few hundred that you spend in fees. 

[SBMS]

On 15/06/2022 at 17:55, puntloos said:

Here's a quote I received. Rounding numbers a bit and comparing with a similar sized mortgage, in 2019

 

- 500K Loan
- 2022 3.89% builder mortgage with a fixed rate for the lender, but still dependent on the BAE - so really variable IMO

- 2019 1.99% standard mortgage fixed for 5 years

 

	Build, variable	Standard,fixed
Lender fee	£6,000.00	£1,500.00
Valuation	£2,100.00	£750.00
Reinspection	£2,700.00
Redemption	£75.00	£75.00
Release Deed	£50.00	£50.00
Booking Fee	£300.00
Brokers Fee	£5,000.00
			Difference
	£16,300.00	£2,370.00	£13,900.00

 

I'm aware I'm comparing apples and oranges.. pre covid post covid too..  but

 

Is 14,000 fair given the complexity and unusualness of the mortgage? A bunch of fees that come up, and an additional broker fee of 5000 (The broker gets about 2500 from the lender as finders fee already, so total fee 7500!) And why are there suddenly two valuations that are 2-3x the price of the valuation for the standard mortgage? (especially given the valuation surely should take into account they are really just valuating a plot of land? Seems easier?)

 

Is this quite out there or is this simply the cost of building? Can someone talk me through if the above is somewhat reasonable or if I'm being ripped off?

 

Separate question - since this quote is from one mortgage broker, is it acceptable to shop around (ask other mortgage brokers) or do brokers demand that you either go with them or cancel the work and start over? Im certainly tempted to e.g. chat to @matthyde83's guy, or buildstore, but I don't want to unfairly play people off against eachother.

This seems really high. Our fees from buildstore:

 

£300 broker fee

£1500 lender arrangement fee

£105 lender conveyancing fee

£200 discharge fee

£20 chaps fee

£500 valuation fee

 

We chose to go with an advance stage mortgage where funds are released in advance and the application is packaged and underwritten with an insurance policy and paid an additional £3k on top of this for that type of mortgage. 
 

This was 12m ago. 

[puntloos]

4 hours ago, SBMS said:

This seems really high. Our fees from buildstore:

 

£300 broker fee

£1500 lender arrangement fee

£105 lender conveyancing fee

£200 discharge fee

£20 chaps fee

£500 valuation fee

 

We chose to go with an advance stage mortgage where funds are released in advance and the application is packaged and underwritten with an insurance policy and paid an additional £3k on top of this for that type of mortgage. 
 

This was 12m ago. 

Can I ask what ballpark amount you were asking them for though? I'm sure fees differ greatly if you ask 50, 250 or 500,000.. 

[SBMS]

2 hours ago, puntloos said:

Can I ask what ballpark amount you were asking them for though? I'm sure fees differ greatly if you ask 50, 250 or 500,000.. 

It was around 400k

Edited June 25, 2022 by SBMS

[puntloos]

16 minutes ago, SBMS said:

It was around 400k

Yup dramatically cheaper then. And given that indeed our situation is ... reasonably stable (2 IT professionals, 1 kid, no further debts) it seems the self-serve approach might work out.. thanks!

[Alan Ambrose]

>>> What is the benefit of a mortgage advisor specialist vs self serve.

 

I think it boils down to how standard your situation is. If it's run-of-the-mill then self serve is fine. If it's a bit special, then broker. There's nothing to stop you doing both in parallel and taking the best deal.