What a self build mortgage can cover?

[lora]

I have had a good search of the internet but cant actually seem to find any details on what a build store self build mortgage can be used to cover.

 

When budgeting I have broken costs down into several areas including Land, Materials, Utilities, Equipment, Labour and finally Legal (surveys/mortgage fees, planning fees, architect fees etc). However I would like to find out if a mortgage can be used to cover the legal side as well as the others?

Edited February 3, 2018 by lora

[Hecateh]

I can't answer the whole question but the legal costs of the mortgage itself can be included in the mortgage - 

In my case I have a ridging loan rather than a self build mortgage as I don't have an income.  The interest in this case is also rolled into the loan until I pay it off.

One thing I think other members will tell you soon don't go with Build Store but try and go direct.  In my case the same mortgage came in at about £1,500 cheaper by using a broker but I suspect I could have gone direct and saved even more.  
You are lucky to have found this forum earlier on in your quest to self build than I did.  There is so much help, knowledge and support on here.  

 

[lora]

Thanks for your answer, the reason I decided on build store because they are offering 85% LTV at the moment and if I am going to be able to do this on limited savings I need the highest LTV possible really. Having looked at other mortgages they seem to be only around the 75% mark.

[Hecateh]

Always worth talking to them - buildstore only act as brokers and their charges are higher.

 

Also - I started my self build in December and have been hit with a few extras I wasn't expecting - with hindsight there are some that I could/should have checked out before.

• The biggest one is because I am on a slope - I expected foundations to be a bit more but they came in at 12k more
• Second one - there isn't a sewer near by that I can tee into (on a neighbour's property and under a shed and the neighbours are not pleased that I am building)/  another 3k extra to put in a pump to a sewer on my property.  Water board may have been able to sort something out but that may have come in expensive too
• Latest one - electricity.  Nearest wiring is up to capacity - have to come about 70m from nearest junction £8.6k instead of the 1.5 to 3 I was expecting.

None of these increase the final value of the house so would not have been able to add more to a mortgage because of them.

You probably won't have the same issues but you will almost definitely have some.  They aren't kidding when they say you should have at least a 20% contingency.  That is more than 20% of my build (only a small bungalow and I already owned the land.

 

Do you already own the land - the value of that can be used as part of your 'deposit'

[Hecateh]

Thinking about it - I have a feeling that they base what they will lend you on the predicted final value of the property rather than your costs

 

[Jeremy Harris]

2 hours ago, Hecateh said:

Thinking about it - I have a feeling that they base what they will lend you on the predicted final value of the property rather than your costs

 

 

 

That was certainly the case with Ecology.  We needed a small mortgage (£50k) and the valuer estimated the value of the completed house, just from a visit to the plot whilst we were still doing the ground works.  I don't think we even had the foundation area levelled at the time.  I remember talking to the lady at the Ecology and she said that there would be no problem, as not only was the LTV on the completed house value well inside their lending criteria, but the LTV on the bare plot as it stood was as well.

[Thedreamer]

I considered buildstore but the levels of  arrangement fees, indemnity insurance, valuation fees, brokers fees and other fees were eye watering. I think quite a few members on the forum share the same opinion. In addition if you have a self build product you will need to consider how you will move from the self build mortgage to a standard residential mortgage. If your switch provider, your need to consider items such as warranties etc, it all gets very expensive for piece of paper, especially if you have no intention to sell and have a simple design. I would suggest contacting lenders directly and checking to see if what they can offer. 

 

Obviously I don't know your personal circumstances, but affordability assessment can be ridiculously different to what you expect it will be.

 

Also your query regarding professional fees, my lender has told me exclude these from the build cost calculations. I have to finance these through other means.

 

I should say that my mortgage application was approved at branch level last week and is currently with the underwriter, so finger, toes and everythink crossed, I've nearly been through this process very recently.

 

 

 

 

[Temp]

You don't have to give the mortgage company an exact breakdown of what all the money will be used for. In fact I would avoid doing that to give you some flexibility. As others have said the amount they will lend depends on the likely final value. 

 

If you use a builder as a prime contractor it's important that the payment schedule you agree with the builder is compatible with the release schedule of the lender. They should not be the same, you want to arrange for the lender to be some way ahead of the builder both in time and value if possible.

 

Remember it's normal to retain something like 10% of what you owe the builder for snagging, our architect suggested that this 10% should be retained for 1 year after completion and our builder agreed. It's not unreasonable to retain 10% of each stage payment for this purpose rather than subtract it all from the final stage payment. Again this needs to be agreed in writing up front. That might also help with your cash flow.

 

Many self builders have been approached by their builder half way through for an advance payment, perhaps to "help with their cash flow" or similar reason. I would never pay the builder in advance but you might consider paying for something like the windows (eg direct to the window company) if they need a deposit or final payment on delivery. Just so long as you get the invoice/reciept in your name so you can reclaim the VAT. Remember to write a letter documenting that you have agreed and made this extra payment and that it will be deducted from the next stage payment. 

 

The one thing to avoid is ending up in a situation where you have paid the builder 80-90% of the money but he's only done 40% of the work. This can easily happen if there are a lot of changes along the way. If in doubt a Quantity Surveyor will (for a fee) come and value the work done. 

 

Edited February 6, 2018 by Temp

[curlewhouse]

We ended up with little choice but to use Buildstore and they were frankly awful! Paperwork lost, hung on to until it was out of date before they'd do anything with it, (so you'd have to get new payslips etc), not even having processed the very first  part until I chased them up after 3 weeks - only for them to let slip that they'd done nothing. Their way of processing applications seems to be in a haphazard manner - that was certainly the impression we got when being asked for documents we'd already sent, or to send new updated ones and so on. The building society themselves are lovely as a couple of times I contacted them to explain what was happening and ask what they really  wanted - they basically contradicted what BS (such an apt set of initials) were telling us.  If you must apply via BS, insist they tell you what documents they need in one go - with us they asked for them one at a time (after weeks of this I challenged them and they claimed the Building Society was doing it that way - which seemed so unlikely that I rang the building society who confirmed that they had sent a list of everything they need in one go to Buildstore as you would expect - and I know who I believe! ) dragging it out for weeks and weeks more unnecessarily, when we could have simply sent in one pack of documents. Once past that point though it has been OK, with stage payments released if not quite as quickly as promised, only a few days late.  Trouble is BS have pretty much a monopoly for some types of self build and know it so there's no pressure to get their act together. If I had to use them again, I'd contact the building society itself much sooner and call BS bluff about the document drip feed "method". So they will get you there, but you may have to keep pushing them to get on with it.

Edited February 9, 2018 by curlewhouse

[Bitpipe]

We also had a great experience with Ecology but I accept they're not applicable to everyones situation. They released the money as we needed it with no questions on what it was for or any proof of progress. We took 50% of the cash at the outset and then went back for two more 25% chunks as needed. All it took was an email and the funds were there in a few days. 

[Ferdinand]

On 06/02/2018 at 12:33, Temp said:

You don't have to give the mortgage company an exact breakdown of what all the money will be used for. In fact I would avoid doing that to give you some flexibility. As others have said the amount they will lend depends on the likely final value. 

 

If you use a builder as a prime contractor it's important that the payment schedule you agree with the builder is compatible with the release schedule of the lender. They should not be the same, you want to arrange for the lender to be some way ahead of the builder both in time and value if possible.

 

Remember it's normal to retain something like 10% of what you owe the builder for snagging, our architect suggested that this 10% should be retained for 1 year after completion and our builder agreed. It's not unreasonable to retain 10% of each stage payment for this purpose rather than subtract it all from the final stage payment. Again this needs to be agreed in writing up front. That might also help with your cash flow.

 

Many self builders have been approached by their builder half way through for an advance payment, perhaps to "help with their cash flow" or similar reason. I would never pay the builder in advance but you might consider paying for something like the windows (eg direct to the window company) if they need a deposit or final payment on delivery. Just so long as you get the invoice/reciept in your name so you can reclaim the VAT. Remember to write a letter documenting that you have agreed and made this extra payment and that it will be deducted from the next stage payment. 

 

The one thing to avoid is ending up in a situation where you have paid the builder 80-90% of the money but he's only done 40% of the work. This can easily happen if there are a lot of changes along the way. If in doubt a Quantity Surveyor will (for a fee) come and value the work done. 

 

 

WRiting that letter from para 4, you could put an acknowledged signature space at the bottom for your builder to sign. 2 copies, one each.

 

But that can potentially be awkward should they refuse to sign.

 

Ferdinand