Another newbie self build question

[Jude1234]

We are in the very fortunate position of having enough money to purchase the land and pay for the majority of eth build with savings and cash from eth sale of our house.  We will need a 20% mortgage to finalise the build (approx. £100 k).  I understand that I can get this from a self build mortgage but the rates are so much higher than a normal mortgage and we will only need the money for 6 months max before the house will be completed and we could apply for a normal mortgage at a lower rate.  Will we just have to accept to pay the higher rate for 2 years or is there a smarter way of doing it??  I do not want to go to build store for advice as I have read numerous horror stories on here and ebuild about them.

[ultramods]

I am currently arranging a 2 year mortgage with Newcastle building society via Build Store. We will pay interest only (5%) on the money that we draw down from the mortgage during the build. Once the house is completed Newcastle will switch us to a standard residential mortgage around 2 - 3%

[ToughButterCup]

17 minutes ago, Jude1234 said:

We are in the very fortunate position of having enough money to purchase the land and pay for the majority of eth build with savings and cash from the sale of our house. [...]

 

That was - was - our model.

I would be the first to wish you a speedy  house sale at a sensible price, where the transaction runs smoothly and the money  is in the bank  a whole month before you need the proceeds.

 

Have a fall-back plan in place for delay and sudden changes in the housing market.

Good luck!

Ian

 

[Jude1234]

Just now, recoveringacademic said:

 

That was - was - our model.

I would be the first to wish you a speedy  house sale at a sensible price, where the transaction runs smoothly and the money  is in the bank  a whole month before you need the proceeds.

 

Have a fall-back plan in place for delay and sudden changes in the housing market.

Good luck!

Ian

 

We are lucky, we have sold and are in a rental, money is in the bank

[Jude1234]

8 minutes ago, ultramods said:

I am currently arranging a 2 year mortgage with Newcastle building society via Build Store. We will pay interest only (5%) on the money that we draw down from the mortgage during the build. Once the house is completed Newcastle will switch us to a standard residential mortgage around 2 - 3%

Oh that sounds ideal, do they only accept applications via buildstore?

[ToughButterCup]

9 minutes ago, Jude1234 said:

We are lucky, we have sold and are in a rental, money is in the bank

 

Now all you need to do is be tough on costs and the causes of costs, then!  Excellent.

 

[ragg987]

We purchased the land with cash and started our build based on the cash we had, but having arranged a self-build mortgage first. We asked for the initial drawdown to start when we needed it rather than the traditional "5 stages". There was a lot of to-and-fro as it broke the standard model, but in the end we drew the sum down in three phases which I had a degree of control over, and provided the lender could see our build value rising they were happy to lend against that. This meant we only paid the higher interest rate when we needed the next tranche of money - in the end we had the build mortgage for approx 13 or 14 months and once BC sign-off they transferred to a standard mortgage with no extra fees or paperwork.

 

In between we had to juggle finances / timings as we were selling our house to finance a large portion of the build (apart from the mortgage). Luckily we managed to sell before it became critical. Our fall-back would have been to get to water-tight stage and stop until we sold it.

 

Melton, I approached them direct.

[PeterW]

Melton are good although not sure they sell direct anymore which is a shame as going through any of the B###d####e or other brokers is a mare ...!!! 

 

Edited to add

 

Looks like not only do they do an  advance product direct they have extended the range now ..! Some nice products in there ..!

 

https://www.themelton.co.uk/our_mortgages/self-build-renovation-mortgages/

[Triple07]

Hope you don't mind me asking but what kinda checks did they put in place re build? Did u need separate warrantee for them or anything?

we are in similar situation as we had intended to sell our current home to fund the last 25-30% of the build but property marked here is rubbish so we are gonna try letting it instead which then doesn't release the equity.

now looking at self build mortgage for maybe 6/9month but don't want to get nhbc involved or anything as we plan to live here forever more...

[ragg987]

They are pretty thorough as they need to protect their risk. As part of the application process they asked for plans, permissions, insurances, build costs, source of funds, etc. I cannot recall if they explicitly wanted the warranty but I had that covered.

 

Also they send a surveyor prior to each stage release, it is only a 5 min visit but a notional valuation was then created to ensure the loan amount was proportional to the value of the build at that point.

[Triple07]

Thanks @ragg987 that was really helpful info

[ragg987]

19 hours ago, Triple07 said:

we are in similar situation as we had intended to sell our current home to fund the last 25-30% of the build but property marked here is rubbish so we are gonna try letting it instead which then doesn't release the equity.

These are tough decisions and we were facing the same situation - home on market for 1 year and still no sale - though we were lucky it did finally sell before it got to a critical stage.

 

One thing I will say is that juggling the incomings with outgoings vs build progress was a big stress point for me. Once we had the monies available I felt a huge weight had been lifted and this let us get on with our life, else the build would have dragged and so would the stress that goes with it.

 

So my input here is to do what it takes to get the money side sorted. The cost of dragging the build out might outweigh the "loss" if you dropped your pants (so to speak) on the sale price. By cost I mean both financially and emotionally.

 

In our case we needed both to sell and get a mortgage to complete the build, it sounds like your situation is different and you only need to do one or the other.