Adamantium

Residential Mortgage Secured on plot

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Hi all,

 

Has anyone heard of this?

 

I'm not looking for a self build mortgage as such, just a conventional residential mortgage but secured against the plot. Reason being it would be easier to deal with than a conventional self build mortgage.

 

Basically I'd like to remortgage now to a mortgage company that won't care if I knock my house down because their money is secure (plot with PP is worth double what I want to borrow).

 

I then have my own cash to build the house.

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I think you will find this to be near-impossible to arrange, as the mortgage market deliberately sets higher interest rates for self-build mortgages, and is unlikely to want to lend on a building plot at normal rates.

 

Worth talking to a good broker, though, as sometimes brokers can arrange deals that aren't normally available when going direct to the lender.  A specialist lender might be prepared to lend on the value of the plot only, but I suspect you may struggle a bit to get an interest rate that's any better than that for a self-build mortgage, plus you may well end up paying the exorbitant up-front fees that the self-build mortgage brokers seem to charge.

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I think you would need to ask a broker to find that.

 

From their point of view it would still be a higher risk than a normal house for a conventional bank so that would require a premium.

 

Perhaps worth talking to a couple of more specialist banks to see if you can treat it as an intermediate risk. Suspect that the size of your likely mortgage on a large plot in Londonish may justify the overhead.

 

Or are you financially sophisticated, and can you get an interest free balance transfer or initial purchase deal card with a really high limit over several years? I have no idea how far these deals go, but you may be in a position to find out.

 

I am aware of people who have put ridiculous amounts through their personal cards ... 5 or 6 figures per month ... in search of air miles by using it as the conduit for purchases for quite large businesses they own via expenses, so obviously unusual setups are achievable for a suitable customer.

 

Best of luck.

 

Ferdinand

 

 

Edited by Ferdinand

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In theory this should not be a problem that cannot be solved provided you achieve two things and one risk item does not crystalise:

  1. The plot will need to have a value in excess of the mortgage, by a significant margin - lenders will have appetites here from about 70% loan to value down. This just means that the plot is significantly more valuable than the cost of the build. However this is as the plot stands because:
  2. Any building / preparation work you are likely to do must not devalue the plot below the appetite threshold with a margin in hand the lender is likely to set.

The risk item is that lenders might not see this as a 'domestic' proposition and want you to take a commercial mortgage - fewer rules around repossession should you default, particularly if you have another domestic mortgage somewhere else.

 

Mortgage broker is the way forward, but push for what you want and don't get managed into the box they have ready for you!

 

 

 

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Needless to say a commercial mortgage will have a potentially higher rate of interest :-).

 

Also, personal loans are now down around 3% APR, but the amounts are limited to around £25k, which will probably not even scratch the surface of this. Perhaps specialist banks may have something here in increasing that 25k figure.

 

F

Edited by Ferdinand

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I think what you want is called a "land only mortgage".  Google that without quotes finds a few hits although some are aimed at farmers (eg borrow against your land to build a barn). 

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Perhaps talk to the Halifax as they say..

 

https://www.halifax-intermediaries.co.uk/products/mortgages/self_build/stages.aspx

Halifax is one of a few lenders who will also allow clients to receive an initial stage payment to help them to buy the land as well as releasing funds at the more usual build stages.

 

https://www.halifax-intermediaries.co.uk/products/mortgages/self_build/buyingtheland.aspx

Quote

The initial release can be up to a maximum of 75% of the current value. Where funds are being released for land purchase it must also not exceed 75% of the price of the land paid by the applicant. Where all the land has been gifted the first installment will not be released until footings and foundations stage has been reached. When the construction reaches the appropriate stages, further releases up to a maximum of 75% of the current value at each stage less the amount we have already released can be considered. However, for the penultimate stage release a minimum of 10% of the total loan will be retained, as a final release, until the property is complete and we are in satisfactory receipt of the final completion certificate

 

So suppose the plot cost £200,000 and you wanted to borrow £100,000. You could ask them for £110,000. They would release the £100,000 you need (it's less than 75% of the land value) but they would retain 10% (about £10,000) until completion. OK so not ideal but no other stage payments to worry about. 

 

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Dunno if it's any use, but Virgin Money were happy to remortgage our current house for the purpose of building the new one. Not the same site admittedly, but they're happy with a full drawdown for *any* purpose.

Ther were a couple of other lenders my broker tried (I'm self-employed which limits options a bit),  the Nationwide were perfectly happy to lend *until* we confirmed the purpose, at which time they reduced the offer by about 20%...

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The issue is I'm living in the house that's on the plot already.

 

The plot with planning permission, regardless of existing house, is worth much more than the build cost (possibly 100% more depending on the build.

 

I'd love to retain my existing mortgage but I can't knock down the asset on which the mortgage is secured. I suspect I'm just going to have to lump it and move to self build with a poor rate and without my lovely offset facility.

Edited by Adamantium

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Talk to a mortgage professional before you make any decisions such as giving up your offset facility you never know what's out there. 

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At the moment, handelsbanken seems to be my best bet - lovely people to deal with.

 

It hurts that I have to pay £10,000 just to set up the mortgage, £2000 for valuation and £14,000 for continual monitoring by QS before the staged release of funds.

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3 hours ago, Adamantium said:

and £14,000 for continual monitoring by QS before the staged release of funds.

 

I do hope that’s a typo...!!!

 

Stage release by Melton BS is £80 a time and the surveyor is fantastic ..! 

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WHen Intalked to HB about banking for a business they essentially told me they were not interested in brand new startups, and focused on the top 1% in personal banking, and to come back when we were several years old and established/very profitable.

 

I think you get the old fashioned personal service and pay for it.

 

I was talking to a 35-40 year old former Director of one of the big banks who was glad to have got out. Very good people for what looks like a very good bank if it has what you want and vice-versa.

 

Edited by Ferdinand

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On 2/22/2018 at 20:20, PeterW said:

 

I do hope that’s a typo...!!!

 

Stage release by Melton BS is £80 a time and the surveyor is fantastic ..! 

 

It's not a typo.

 

I get QS services for that, it's not the banks charge, I pay the QS directly and so don't intend to employ another.

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We use HB for business banking and  do some personal banking with them on the back of that. I believe they dont like unrelated personal banking so if you approach for just a personal account generally they say no ditto with startups, its not their target market. They are mostly great people not like big faceless banks  (also bank with Lloyds and have done for more than 40 years.....why I sometimes ask myself!) however they are growing rapidly and in the 10 years or so we have been with them the size of the UK presence must have tripled or quadroupled or even more...its their stated strategy to expand and take a bigger share of the UK business market. I hope they don’t lose the personal element that makes them so much nicer to deal with than the bigger banks........an awful lot of their staff seem to be ex Nat West and RBS in our area but different ethos at HB so they are good.

 

They are not cheap, they ask high fees for valuations and arrangements but I think their interest rates are not so bad...libor linked perhaps.....they are more flexible than big lenders even though the set up fees may be more.

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6 hours ago, Adamantium said:

 

It's not a typo.

 

I get QS services for that, it's not the banks charge, I pay the QS directly and so don't intend to employ another.

 

Whats the QS actually doing for that ..??? A full bill of quants can be done for £2-300, are they doing the tendering and procurement management too ..?? 

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