Selfbuild mortgage advice!

[Amateur bob]

Good morning i am going to be applying for a self build mortgage soon is there any advice forum members could give me? 

 

I was told buildstore were good should they be my first choice? I own plot outright and have builder quotes from 310k to 350k, i have 130k saved up/from sold house, the concern i have is that im self employed although last year was quite a profitable one the year before i only got a 20k profit share(business with 4 partners), my wife is in a job earning 20k per year

 

Am i likely to be able to borrow enough and how long roughly do these mortgage applications take?

 

Any advice would be much appreciated!

 

Thanks

[G and J]

We’ve been looking at mortgages, including self build, standard and lifetime.

 

First thing we noticed is that some self build mortgage lenders aren’t so keen on lending if you already own the site.  Second thing we noticed was that some mortgage companies inc. self build mortgages are particular about the type of build.  Hence we are now looking at reducing the amount of wood cladding to less than 50% and we are putting in a blockwork outer skin for just over 50% of the external walls.  We’ve had useful guidance from a specialist broker, so don’t be afraid to talk to one of those.

[Oz07]

34 minutes ago, G and J said:

We’ve been looking at mortgages, including self build, standard and lifetime.

 

First thing we noticed is that some self build mortgage lenders aren’t so keen on lending if you already own the site.  Second thing we noticed was that some mortgage companies inc. self build mortgages are particular about the type of build.  Hence we are now looking at reducing the amount of wood cladding to less than 50% and we are putting in a blockwork outer skin for just over 50% of the external walls.  We’ve had useful guidance from a specialist broker, so don’t be afraid to talk to one of those.

Interesting on the cladding. Is it to do with being flammable?

 

Also interesting about the lenders preferring to be on-board for purchase. I had a self build mortgage on my first and bought plot myself before getting a mortgage. Is it the case you can apply for the mortgage when you purchase and have the charge put onto the property then and only draw down funds when needed?

[Bozza]

I doubt LTV will be a problem for lenders in your circumstances, just the affordability assessment for the monthly payments. Ultimately you’ll want to convert the self build mortgage to a residential one, for the outstanding £220k, once competed.   The main lenders have affordability calculators online you can use.  That will give you a good indication as to whether they can lend you £220k.   Monthly Payments probably circa £1100 ish.

 

many here including me recommend Ecology for self build mortgage.  
 

the good news for you is mortgage rates are clearly coming down.

 

Your situation re savings / own plot / build cost is almost identical to mine.   It was quite a way into the build before I had to drawdown the SB mortgage.

 

make sure you’ll have an architects certificate or warranty in place to get your residential mortgage.

 

 

 

[G and J]

28 minutes ago, Oz07 said:

Interesting on the cladding. Is it to do with being flammable?

 

Also interesting about the lenders preferring to be on-board for purchase. I had a self build mortgage on my first and bought plot myself before getting a mortgage. Is it the case you can apply for the mortgage when you purchase and have the charge put onto the property then and only draw down funds when needed?

Re: Cladding - dunno, might be, certainly the concern about cladding in general won’t help.  Might be more about the British obsession with masonry, which I have been guilty of in previous years.  
 

Re: Mortgages - dunno that either.  Underwriters aren’t ones to share their thinking, and they focus generally on volume and risk.  So if their criteria accidentally disqualifies the most fabulous builds which only constitute 0.17% of the market why would they worry.

 

I was recently surprised to hear of a Hanley self build mortgage which gives slightly better terms but is only applicable if you are at wall plate.  My guess is that that is because most self builds that fail do so before wall plate.  

[Amateur bob]

2 hours ago, G and J said:

We’ve been looking at mortgages, including self build, standard and lifetime.

 

First thing we noticed is that some self build mortgage lenders aren’t so keen on lending if you already own the site.  Second thing we noticed was that some mortgage companies inc. self build mortgages are particular about the type of build.  Hence we are now looking at reducing the amount of wood cladding to less than 50% and we are putting in a blockwork outer skin for just over 50% of the external walls.  We’ve had useful guidance from a specialist broker, so don’t be afraid to talk to one of those.

Thats very strange, surely if you own the plot you can use the asset value to borrow against? less risk for the lender

[Amateur bob]

1 hour ago, Bozza said:

I doubt LTV will be a problem for lenders in your circumstances, just the affordability assessment for the monthly payments. Ultimately you’ll want to convert the self build mortgage to a residential one, for the outstanding £220k, once competed.   The main lenders have affordability calculators online you can use.  That will give you a good indication as to whether they can lend you £220k.   Monthly Payments probably circa £1100 ish.

 

many here including me recommend Ecology for self build mortgage.  
 

the good news for you is mortgage rates are clearly coming down.

 

Your situation re savings / own plot / build cost is almost identical to mine.   It was quite a way into the build before I had to drawdown the SB mortgage.

 

make sure you’ll have an architects certificate or warranty in place to get your residential mortgage.

 

 

 

Yes the affordability will prob be the main one, i am moving out of rented accomodation into a static caravan next month hopefully that will help, did you find it easy enough to get a mortgage with you having a good deposit and owned plot or were they strict on you with the affordability test?

 

ive heard you need 3 months of bank statements aswell as proof of your profits?

 

ive been trying to keep my spending down the last couple of months as ill also need to show ability to pay an 11k tax bill for next year as well as the mortgage!

[Amateur bob]

2 hours ago, G and J said:

Re: Cladding - dunno, might be, certainly the concern about cladding in general won’t help.  Might be more about the British obsession with masonry, which I have been guilty of in previous years.  
 

Re: Mortgages - dunno that either.  Underwriters aren’t ones to share their thinking, and they focus generally on volume and risk.  So if their criteria accidentally disqualifies the most fabulous builds which only constitute 0.17% of the market why would they worry.

 

I was recently surprised to hear of a Hanley self build mortgage which gives slightly better terms but is only applicable if you are at wall plate.  My guess is that that is because most self builds that fail do so before wall plate.  

im sure i read somewhere that its harder to get a mortgage if the founds are already complete(possibly as lender wont know to what standard theyve bn done without inspection?) but from what your saying it could be the opposite? i could potentially use my own cash to get it to floor slab level and then apply for mortgage?

[Amateur bob]

is 6-8 weeks a realistic expectation from mortgage application submission to approval?

[Bozza]

5 hours ago, Amateur bob said:

Yes the affordability will prob be the main one, i am moving out of rented accomodation into a static caravan next month hopefully that will help, did you find it easy enough to get a mortgage with you having a good deposit and owned plot or were they strict on you with the affordability test?

 

ive heard you need 3 months of bank statements aswell as proof of your profits?

 

ive been trying to keep my spending down the last couple of months as ill also need to show ability to pay an 11k tax bill for next year as well as the mortgage!

Having a good LTV won’t trump the affordability test I’m afraid.  Yes they required us to meet the affordability test despite having a low LTV.  When assessing your three months of affordability bear in mind your living costs would increase from being in a caravan to moving into your bigger new house and they’ll need to be assured that you can afford to live in your new house with the mortgage and the bills etc.   the good news though is if you’re in a caravan and saving every penny that is money you don’t need to lend, thus hopefully reducing your loan into an acceptable amount for your affordability.   
 

when you put your finances through the online mortgage affordability check, did it tell you how much they would potentially lend you?  

[ChrisInKent]

7 hours ago, Amateur bob said:

is 6-8 weeks a realistic expectation from mortgage application submission to approval?

My advice is start now. We started the mortgage process back in May and it’s still going on. 
Build Store gave loads of advice and we did use them as broker in the end. 50% cladding requirement was needed to have more mortgage companies willing to lend, we’ve got 100% metal roof/cladding so only a couple of lenders were happy with that. If you’re not going with an A rated house then Ecology probably won’t be interested. If you’re doing anything unusual you might struggle to find a lender.
Get a solicitor lined up early - they’ll need to do land searches, certify the land is owned by you, and the first staged payment may need to be made via them. 
Ask what the warranty and insurance requirements of the lenders are asap. We needed warranty, £5m public liability and £10m employer liability in place. 
Make sure you include all these fees in your budget forecast - they add £thousands on  

Finally work out your own stage release requirements so that you know you’ll have funds at the right time - an advance rather than arrears payment schedule might cost you more.,

[Conor]

For lenders, I can highly recommend ecology.

[PNAmble]

For a broker I can recommend mayflower.  We are both self employed, we ended up going Harpenden as they provided a larger lending capability.  It took about three months to get it all sorted. You do have to pay a broker cost but in our case it was money well spent and they will also help us convert to a standard mortgage once we get structural warranty signed off. 
 

some lenders won’t lend on properties with a flat roof.  
 

One thing is that most self build mortgage were over 2 years, ours was built in a year so also look at the ERC terms.

[Oz07]

33 minutes ago, PNAmble said:

For a broker I can recommend mayflower.  We are both self employed, we ended up going Harpenden as they provided a larger lending capability.  It took about three months to get it all sorted. You do have to pay a broker cost but in our case it was money well spent and they will also help us convert to a standard mortgage once we get structural warranty signed off. 
 

some lenders won’t lend on properties with a flat roof.  
 

One thing is that most self build mortgage were over 2 years, ours was built in a year so also look at the ERC terms.

You could just stick to the self build product if the charge was bigger than the coat of switching to standard mortgage. 

 

It seems these mortgage providers are concerned with similar things you have to input for insurance quotes on comparison sites. I hadn't twigged that the material your roof was covered in effected mortgagability. Good tip there above @ChrisInKent

[Eric]

Ecology.

No issue if you own the land.

6-8 weeks for application, quite difficult to get the first appointment.

You need to have a plan of costs, proof of income, outgoings etc.

Very helpful & easy to deal with.

[PNAmble]

5 minutes ago, Oz07 said:

You could just stick to the self build product if the charge was bigger than the coat of switching to standard mortgage. 

Yes, and I’m likely to do that.  However Mayflower are doing all the running around and looking at the options.  There is quite a difference in interest rates between a good mortgage and a self build one.  
 

some SB mortgages also have specific ‘drawdown stages’.  Harpenden don’t care it’s just based on valuation, depending on your build and finance that could be important.  

[Amateur bob]

On 30/08/2024 at 19:01, Bozza said:

Having a good LTV won’t trump the affordability test I’m afraid.  Yes they required us to meet the affordability test despite having a low LTV.  When assessing your three months of affordability bear in mind your living costs would increase from being in a caravan to moving into your bigger new house and they’ll need to be assured that you can afford to live in your new house with the mortgage and the bills etc.   the good news though is if you’re in a caravan and saving every penny that is money you don’t need to lend, thus hopefully reducing your loan into an acceptable amount for your affordability.   
 

when you put your finances through the online mortgage affordability check, did it tell you how much they would potentially lend you?  

ah i thought it would help though? yes theyll probably want to see me clearing at least 1500/month between in goings and outgoings?i had an expensive month in july were i was actually negative 400 due to a tax bill and a few other things so i was thinking of waiting until the end of october before applying for mortgage and giving them bank statements for aug/sept/oct will this likely be sufficient?

 

the online calc says i can borrow 250k

[Amateur bob]

On 30/08/2024 at 21:39, ChrisInKent said:

My advice is start now. We started the mortgage process back in May and it’s still going on. 
Build Store gave loads of advice and we did use them as broker in the end. 50% cladding requirement was needed to have more mortgage companies willing to lend, we’ve got 100% metal roof/cladding so only a couple of lenders were happy with that. If you’re not going with an A rated house then Ecology probably won’t be interested. If you’re doing anything unusual you might struggle to find a lender.
Get a solicitor lined up early - they’ll need to do land searches, certify the land is owned by you, and the first staged payment may need to be made via them. 
Ask what the warranty and insurance requirements of the lenders are asap. We needed warranty, £5m public liability and £10m employer liability in place. 
Make sure you include all these fees in your budget forecast - they add £thousands on  

Finally work out your own stage release requirements so that you know you’ll have funds at the right time - an advance rather than arrears payment schedule might cost you more.,

i would like to get started but i had an expensive month in july were i was actually negative 400 due to a tax bill and a few other things so i was thinking of waiting until the end of october before applying for mortgage and giving them bank statements for aug/sept/oct, ive also started making a payment of 2000 extra from the business account to my personal account each month as previously i was just transferring enough to live on i now want to show a surplus to the lender is this a good idea?

[Amateur bob]

On 31/08/2024 at 06:27, Conor said:

For lenders, I can highly recommend ecology.

do they cover scotland too?

[Amateur bob]

On 31/08/2024 at 08:23, PNAmble said:

Yes, and I’m likely to do that.  However Mayflower are doing all the running around and looking at the options.  There is quite a difference in interest rates between a good mortgage and a self build one.  
 

some SB mortgages also have specific ‘drawdown stages’.  Harpenden don’t care it’s just based on valuation, depending on your build and finance that could be important.  

are there any lenders that just focus on valuation and less strict on affordability tests?

[Bozza]

5 hours ago, Amateur bob said:

are there any lenders that just focus on valuation and less strict on affordability tests?

I doubt it as I’m pretty sure they are strictly regulated.   A low LTV means they lend at a lower rate.  Their ideal situation will be lending lots of money with a higher LTV & interest rate to someone who is certain to make the payments.   They’ll be worried about having to repossess a half finished house.

 

Re other issues discussed,Ecology don’t require you to build A rated you’re likely to get a decent B rate pretty easily with decent spec build.  And yes they lend in Scotland. Their fees were if I recall cheaper than Buildstore.  I’d strongly advise to have a phone conversation with them they are very, very good.
 

As you are saying you are borderline on affordability if I were you I’d save religiously while interest rates are high and you’re away to move into a caravan.  Build up that cash while interest rates at high and give yourself a chance to demonstrate repayment affordability.    Interest rates are widely expected to fall into next year.  
 

Due to your savings it’s going to be well into your build before you drawdown any of an approved mortgage, and you can do so on interest only basis.  As such your monthly payment are going to be quite low until you finish the house and convert into a residential mortgage, by which time mortgage rates will be lower.
 

I assume the quotes to build are for a big and higher spec house at £350k, have you had a conversation with the builders to see if you can reduce costs.

 

That is just my opinion.

 

 

 

 

 

 

 

[ChrisInKent]

6 hours ago, Amateur bob said:

 i now want to show a surplus to the lender is this a good idea?

I think it is - showing it’s affordable will be key.

[PNAmble]

8 hours ago, Amateur bob said:

are there any lenders that just focus on valuation and less strict on affordability tests?

a bridging loan is based on valuation not affordability, pretty expensive option.  
 

id talk to a broker (recommend mayflower). 

[PNAmble]

1 hour ago, ChrisInKent said:

 i now want to show a surplus to the lender is this a good idea?

What do you mean a surplus ?   Effectively the lender cares about 3 things. 
 

1) affordability

2) the end valuation

3) your ability (risk) to finish with your and their money. 
 

 

[PNAmble]

8 hours ago, Amateur bob said:

would like to get started but i had an expensive month in july were i was actually negative 400 due to a tax bill and a few other things so i was thinking of waiting until the end of october before applying for mortgage and giving them bank statements for aug/sept/oct, ive also started making a payment of 2000 extra from the business account to my personal account each month as previously i was just transferring enough to live on i now want to sho

a mortgage company will take your last two or three years of accounts and average it; I (limited company) had to wait until my 2nd year accounts had been completed.  My partner (sole trader) had to get an accountant to certify her last three years of accounts. 
 

They won’t care what you pay yourself.  It’s about your business account/ profit.   

Edited September 1 by PNAmble