Self build mortgages for contractors

[Incipiens Mox]

I'm in the early stages of a project to demolish our family home and rebuild the house on the same plot. I've already got planning permission and am in the process of getting building regs through as well as party wall agreements with neighbours etc.

 

I'm lucky enough to own the current property outright, but will need a mortgage for the build. One of the problems I hit when I looked into this is that I am a freelance contractor and finding a lender who will lend on both self-build and to a contractor is quite limiting.

 

I started looking into this in May and found a specialist broker for contractors who would also deal with self build. However, he was only able to find one lender, Halifax, who would lend to contractors on a self-build. I was a bit concerned about this but went with it.

 

Since then, he's done virtually nothing and I've had to push all the time. I've provided a full credit check and lots of other details, but I'm trying to push to get to a stage where they're got enough information to make a formal offer so I can move ahead with the project and plan accordingly. I have still not had anything written from the lender at all to confirm the terms, the amount they will lend or even whether they will lend at all. I've only got from him that they will only lend on 75% of each stage. Is this reasonable when I own the plot?

 

I'm getting to the stage where I would like to bin this broker and go for something else, but I don't know of anything out there.

 

I'm wondering if anyone else (a contractor) has had a similar experience, whether there are other lenders or sources of finance out there? Alternatively, is there anything I can do to speed things up and / or get some certainty?

 

Thanks.

Edited September 11, 2017 by Incipiens Mox

[MikeSharp01]

Halifax might well deal with you directly. It is a bank after all so won't have any of the hangups a building society would have. They may ask why you have bypassed the broker and you can then tell them. 

[Ferdinand]

@MikeSharp01, @Incipiens Mox:

 

Unfortunately, Halifax only deal with Brokers and Financial profesionals for self-build mortgages according to their website.

https://www.halifax.co.uk/mortgages/mortgage-information/property-types/

 

They use a company called "Halifax Intermediaries".

https://www.halifax-intermediaries.co.uk/default.aspx

 

2 year fix. 5.64% interest rate for all customers. £1500 product fee. 75% LTV limited to 75% of the value of each stage. Ouch.

 

(Note: take care to not to let us confuse your status as a "freelance Contractor" with "Contractor" who around here is often a company who develops or is employed to build houses. A small number of people here have built their houses or another if building two as a Contractor using a company set up for the purpose.)

 

I think the way to expedite it may just be to get a different broker; I can see no reason for such a delay. Or alternatively perhaps a phone call to the Halifax side just to progress chase, tough they may refuse point blank to talk to the customer.

 

On "reasonable", I do not see how Halifax would be persuaded to do something different to their normal procedure and terms. They decide what their market offer will be.I assume you have found the quite detailed information online.

 

It may be worth a direct phone call to some of the other providers. If you are committed to a Passive House try Ecology. Buildstore(?) There are Top Ten lists for self-builders on the internet in newspapers etc.. Nottingham BS have told me that they try to be flexible - and they have seem to work from a quite local level. 

 

I think that alternative forms of finance (bridging loans etc) are unlikely to get close to the Halifax 5.64%.

 

Business peer-to-peer type lending or normal peer-to-peer could be an option, but that is unlikely to get near the Halifax rate.

 

This article discusses options, but does not address freelancers directly:

https://www.homebuilding.co.uk/financing-renovation-extension/

 

Ferdinand

 

Edited September 12, 2017 by Ferdinand

[worldwidewebs]

Melton Mowbray BS

 

I'm a contractor too and they've been superb - can't rate them highly enough

[Incipiens Mox]

Thanks for the feedback. I'll certainly try making enquiries with the lenders mentioned. I have generally used a broker in the past as they often get a wider choice and somewhat better rates (even from lenders who had rejected me when I went direct) though that was for a standard house purchase - not a self build.

 

I've never had a broker act so lethargically before and I'm anxious that I might start to get close to the demolition / build date without even an agreement in principle.

 

Regarding the 75% of LTV / 75% per stage restriction, I wasn't sure whether this was normal for self-build in general  or whether I was getting a bad deal through lack of competition. It doesn't sound great to be honest but it emphasises how careful I will have to be with stage estimates.

[Ferdinand]

42 minutes ago, Incipiens Mox said:

Regarding the 75% of LTV / 75% per stage restriction, I wasn't sure whether this was normal for self-build in general  or whether I was getting a bad deal through lack of competition. It doesn't sound great to be honest but it emphasises how careful I will have to be with stage estimates.

 

I think that is Halifax being over-conservative (ie a little detached from how it actually happens) and others are probably more flexible.

Edited September 12, 2017 by Ferdinand

[Bitpipe]

Interesting thread - I'm just about to remortgage off an Ecology self build plan and deciding between 2, 3 or 5 year fix.

 

Did you approach Ecology? Not sure what their self employed cirteria are and there's the issue as to whether your build meets their requirements.

 

Variable for me is that as of Jan I will likely be a freelance contractor also so a) I need to get the remortgage settled before that happens and b) I need to ensure that when I remortgage again I have enough history behind me not to make it troublesome. 3 years seems to be the standard ask.

 

 

[Incipiens Mox]

Just had a conversation with Mowbray. Very sketchy at the moment and no guarantee that they'll take me on. However, I feel I've got at least as far in a 25 minute phone call as I have in the last 3 months with the broker.