Should i sell current house to build new one and rent or stay put?/

[Amateur bob]

im currently in the process of planning to build a house, their is a nice house come up for rent nearby though and i will require both the equity in my current house and a mortgage to build new one if planning passes, do lenders allow you to stay in your owned house and borrow against it for the new build or will i have to sell my current house and move into a static caravan/rented accomodation, im currently deciding which route to take so any advice would be much appreciated!

[Dave Jones]

The issue you will have is how will you turn the equity in your current house into cash ? Maybe extend mortgage ? Self build normally works by you buying the plot outright and then haviing a deposit to the build in cash.

 

Selling up and finding a cheap renter (put furniture into storage) would be my preferred option over a caravan and all the issues that come with it. 

[PNAmble]

We are just starting this process, plot bought outright, cash to get to timber structure up.  House on the market, self build mortgage being applied for.   We are trying to secure all the build costs with the mortgage but if we sell the house we’ll move into rented/borrowed and use the equity as opposed to the mortgage.  We are on a quick build 6-8 months to handover.  Main issue with rented is we have two dogs.   
 

there was never any discussion re staying in our house. As long as we passed the affordability test and build

costs shown to be covered (inc 20% contingency).  Fees so stack up though as self build mortgages have early redemption fees as well so borrowing and rapidly paying it off with house equity isn’t cheap. 
 

our problem was that we couldn’t organise the mortgage until the planning was granted which took 12 weeks longer than expected so now on a tight timescales before ground is broken.  

[Conor]

We had the same dilemma. We could have remortgaged and lived in our old house, or sold and rented. We sold. Best decision as we ended up spending more money than expected and would have struggled otherwise. And with interest rates being what they are, you want to minimise your borrowing.

[Amateur bob]

Thanks for the replies just to add a bit of clarity the plot is owned outright and current house is valued at 120k with 16k mortgage left to pay, i have 40k in savings also which i kept aside so i could start foundations

[Mr Blobby]

Would you not have to pay capital gains tax here because you could end up owning two houses so subsequently disposing of one is a txable event?

[Amateur bob]

1 hour ago, Dave Jones said:

The issue you will have is how will you turn the equity in your current house into cash ? Maybe extend mortgage ? Self build normally works by you buying the plot outright and then haviing a deposit to the build in cash.

 

Selling up and finding a cheap renter (put furniture into storage) would be my preferred option over a caravan and all the issues that come with it. 

I own plot outright but only have 160k ish cash once i sell property with estimated build cost of 300kish so i will need to borrow

[Amateur bob]

Just now, Mr Blobby said:

Would you not have to pay capital gains tax here because you could end up owning two houses so subsequently disposing of one is a txable event?

Theres an intetesting point as im currently exempt

[Amateur bob]

1 hour ago, PNAmble said:

We are just starting this process, plot bought outright, cash to get to timber structure up.  House on the market, self build mortgage being applied for.   We are trying to secure all the build costs with the mortgage but if we sell the house we’ll move into rented/borrowed and use the equity as opposed to the mortgage.  We are on a quick build 6-8 months to handover.  Main issue with rented is we have two dogs.   
 

there was never any discussion re staying in our house. As long as we passed the affordability test and build

costs shown to be covered (inc 20% contingency).  Fees so stack up though as self build mortgages have early redemption fees as well so borrowing and rapidly paying it off with house equity isn’t cheap. 
 

our problem was that we couldn’t organise the mortgage until the planning was granted which took 12 weeks longer than expected so now on a tight timescales before ground is broken.  

My est build cost all.in is about 300k and id need to borrow roughly half, how much would u say % build cost to get founds done and timber shell up watertight?

[PNAmble]

13 minutes ago, Mr Blobby said:

Would you not have to pay capital gains tax here because you could end up owning two houses so subsequently disposing of one is a txable event?

I think you have 6 months or so overlap allowance. 

[Jilly]

Stay in a static over the summer, part build so liveable,  is another option to keep costs down

[PNAmble]

12 minutes ago, Amateur bob said:

My est build cost all.in is about 300k and id need to borrow roughly half, how much would u say % build cost to get founds done and timber shell up watertight?

 I'm using an on site timber construction method and have really tricky groundworks / retaining walls.  my mortgage company allows me to borrow 65% of the value of the plot from completion but that is likely after groundworks.  watertight includes windows etc so depends upon spec.  my build cost is approx 600K.  will be about 50-60% paid when groundworks, drainage, retaining walls and timber structure is up .. higher end if I include windows.  

[Amateur bob]

11 minutes ago, PNAmble said:

I think you have 6 months or so overlap allowance. 

How do u mean overlap? From the date newbuild is started or completed?

[PNAmble]

Just now, Amateur bob said:

How do u mean overlap? From the date newbuild is started or completed?

completed.  its not a property until its completed.  

[Amateur bob]

6 minutes ago, PNAmble said:

 I'm using an on site timber construction method and have really tricky groundworks / retaining walls.  my mortgage company allows me to borrow 65% of the value of the plot from completion but that is likely after groundworks.  watertight includes windows etc so depends upon spec.  my build cost is approx 600K.  will be about 50-60% paid when groundworks, drainage, retaining walls and timber structure is up .. higher end if I include windows.  

Sounds like a sizeable house? What company is that if you dont mind me asking? I was under impression the lending was based solely on income?

[PNAmble]

15 minutes ago, Amateur bob said:

Sounds like a sizeable house? What company is that if you dont mind me asking? I was under impression the lending was based solely on income?

not that big! in our case it was  based upon affordability and the value of the house you end up building.  We used Mayflower as a broker - we are both self employed  which also added to the complexity.  

[Amateur bob]

1 hour ago, PNAmble said:

not that big! in our case it was  based upon affordability and the value of the house you end up building.  We used Mayflower as a broker - we are both self employed  which also added to the complexity.  

interesting that they factored in the end value as buildstore simply told me they worked on 4.3 x joint salary multiple

[PNAmble]

Most mortgages have a Loan To Value .. whether they are a standard mortgage or a self build one.  Mine is at 65%, and that is used at each stage including how much in total they will lend.  i.e if the house I build is valued at 100K when finished the total amount they'd lend me is 65K, even if I earn 100K per annum.  

[Amateur bob]

2 hours ago, PNAmble said:

Most mortgages have a Loan To Value .. whether they are a standard mortgage or a self build one.  Mine is at 65%, and that is used at each stage including how much in total they will lend.  i.e if the house I build is valued at 100K when finished the total amount they'd lend me is 65K, even if I earn 100K per annum.  

Interesting what if you earned 20k per annum and the 65% was higher than a 4x salarly multiple i.e 150k, would they lend u more based on the loan to value?

[PNAmble]

No,  my deal  for the interest rate I’ll be paying is based on a max LTV of 65%.  You could find a different deal which may have a higher LVT it may have increased interest rates or higher application fee.  

 

From the lenders view point it’s risk management.  this is the way all secured loans (inc mortgages) work
 

I’d suggest talk to either your financial advisor or a broker to see what is available for your circumstances.