Mortgage Options - Already Own PLot?

[soapstar]

Hi Folks,

 

What I would like to know more about is the options available to fund a self build where you already own the land? many self build mortgages assume you are buying a plot plus building. I have heard that you can use' the value of the plot towards your mortgage to fund the build however I do not know the details of this. For example what percentage of the land value can go towards as a deposit so to speak for the self build mortgage? If the land was worth 100k for example.

 

Im sure there has been many of you that has been in the same situation as myself, any advice or experiences would be hugely helpful for us!

 

Thanks! 

[Jeremy Harris]

I found that this is very lender-specific.  The Ecology Building Society were more than happy to use the bare plot that we owned outright (worth at that time around £130k - £140k) as the initial collateral, and although we didn't need it, they valued it on the basis of a completed house value of £340k, so would have lent us more, in stages, had we needed it.

 

Another alternative, if you are already living somewhere, is to consider taking out a mortgage, or second mortgage, on that house, perhaps in addition to a modest mortgage on the plot itself if needed.  A mortgage on an existing house may well be a fair bit less costly than a self-build mortgage, plus you don't have the hassle of the staged release of funds in arrears that some lenders insist on.

 

Sadly the specialist self build brokers seem to charge very high fees and aren't at all quick when it comes to processing applications, so, in my personal view they are best avoided if at all possible.

 

 

 

[soapstar]

Thanks @JSHarris

 

Unfortunately we wont be in a position to fund everything ourselves therefore using the land as a deposit on our mortgage will be a great help to us. We do have a mortgage on our current property right now (not a massive amount).

 

Are BuildStore mortgage advisors worth avoiding given they are specialist brokers for self builds? They were top of our list to start off with. If we can avoid huge fees that would be the ideal scenario for me!

[Jeremy Harris]

I found that they were very expensive (at the time they added their own fee of around £500 on top of any fees from the lender) and they were very, very slow to respond.  at  a guess they added about 6 to 8 weeks to the process.  I think others have had a similar experience with them.  Based on that I'd try to avoid using them if you have any choice.  We went direct to the Ecology, and found them very easy to work with, but they do have restrictions on the type of build they will lend on - it has to meet their environmental and energy use standards.

 

By far the easiest is to mortgage your existing house.  I found that it was relatively easy to get a 5 year, interest-only, mortgage, back when getting any mortgage was tough. 

[ultramods]

If you can avoid build store  I would suggest avoiding them, I found dealing them very frustrating and wasted a lot of time.

 

One option would be to go to a local broker, they might recommenced a lender that isn't on build store list or they may go through build store on your behalf (a broker might be able to deal with build store more effectively on your behalf).

 

The other option is for you to go to a lender directly, which would be my preferred option. Take a look at Scottish Building Society, I might be contacting them, however on their website it does state they will only lend 60% of either what you paid for the land or the value of the land, which ever is lowest), which could be a problem for you/me.

 

A lot of people have used Ecology on this website, from various posts I have read they appear to be easy to deal with, however your build would need to be near passive standard.

Edited February 27, 2018 by ultramods

[ultramods]

Here are the lenders that build loan/store have access to, in many cases you can't to to the lender directly unfortunately. However as I said above a local broker might be able to go directly to the lender otherwise the broker would also need to go via build loan/store.

 

https://www.buildloan.co.uk/product-list.php

[soapstar]

Thank you both @JSHarris & @ultramods

 

Buildstore seems more and more an unlikely candidate now. Still no harm in trying them when it comes to it I guess but I will certainly pursue other alternatives after reading this!

 

Scottish Building Society looks interesting, they have been added to my list of potentials! I was also going to be having a chat with ASPC, I didnt realise they were clued up on self build mortgages until visiting the Scottish home show at the AECC. Cant remember her name off the top of my head but extremely helpful!

 

Before we can proceed any further we need our valuation to be complete on our land, hopefully this wont take too long 

[ultramods]

You might want to hold off on having the land valued (in terms of saving money) until you know which lender you are going with because they may not accept the valuation as they all use different companies.

 

 

 

[soapstar]

Thanks @ultramods for the tip. We are also in the process of changing ownership into my name from another family member - I presume none will be interested until we officially own the land.

 

[ultramods]

Might be worth giving them lender a call and see what they say, some might give a decision in principle without you officially owning the land yet

[Thedreamer]

I sent back my offer with the Scottish Building Society last week and have just opened today's mail which is a letter from my solicitor to arrange the security over the land.

 

Please feel free to ask any questions @soapstar

[jpinthehouse]

we separated the garden plot from existing mortgage and went with Ipswich building society via a broker with the plot as there security 

[Weebles]

We have just remortgaged with Ecology Building Society. We went directly to them. We have remortgaged the outstanding mortgage on our house / land. Next we will demolish the house and start building. We can easily draw down extra up to the value of the plot (minus a retention amount they have stated).  We hopefully won't need more than the plot has been valued at. If we had, there would be an inspection of progress at each stage.

We did go quite a long way down the road with BuildStore. 90 minutes phone call plus formal letter from them.  Their recommended mortgage was actually cheaper than the Ecology for the headline rate. But the up front charges were high, including the BuildStore fees and the set up required jumping through hoops to get money drawn down. We elected to pay lower fees up front, suffer a marginally higher interest rate (still horribly high) and hopefully have easier admin. It has been a smooth process (though did involve paying an estimating company to formally estimate build costs).

i agree with the advice to wait on the land valuation.  Every lender wants their own survey and you'll be paying for it so no point in paying twice.

Some lenders will only work with introducers, like Buildstore. Others happy for direct customers.  We felt happier cutting out the middleman on this one. Good luck ?