Newbie financing advice

[Jeremy Harris]

We got some additional funding by mortgaging our existing house, which at the time was mortgage-free.  I found there were only a few lenders who would offer a mortgage in order to put the funds towards building another house, and that of those that did, the maximum LtV was 50%.  That may have changed a little in the last few years, but it's worth doing some research on what different lenders may offer - we were let down very badly at the last minute by Santander, for example, who offered us a mortgage, completed all the paperwork, took the fees etc, then withdrew the mortgage offer on the day I went in to draw down from it.  Cost us a lot of money and caused a great deal of hassle.

[Stones]

@Jenjen I've built 6 houses over the last 20 years and have financed them in both of the ways you're thinking about.  I would say both have pros and cons.

 

Stay in your current house - potentially limited in what you can borrow on existing terms (if the lender allows it at all), you may also be restricted in what potential lenders will allow in terms of a new self build mortgage i.e. looking at your total outlays and affordability - gone are the days when you could borrow 12 times your earnings (as I did at one point before it all went bang).  You also have to think about what happens if you cannot sell your house or get what you hope for - this can be very stressful.  Plus side is you get to live in your own comfortable home through the build.

 

Sell up prior to building - your fortunate in that you have the cash to buy the plot, so worst case could secure that, get all your ducks in a row whilst selling your house.  Once the house is away, you fund the build through the equity released and new mortgage route.  Positive are you know where you are finance wise, don't have the stress of an unsold house hanging over you, and should comfortably be able to borrow given you own the plot and have a chunk of cash.  Downside is you end up in temporary accommodation ranging from a static caravan to a luxury pad at £000's a month.  What level of discomfort you are prepared to put up with is a decision you have to think about.  Living in grotty accommodation isn't fun...

 

Best advice I can give is think about what compromises to your current lifestyle you are willing to make, how much stress would you be comfortable with, and think carefully about how much you want to spend - do you for example really need to build a 5 bedroom 4 bathroom mansion if its just the two of you.  Maximising value doesn't always mean building the biggest house you can.

[recoveringbuilder]

Agree totally with @Stones, This build and the last one we stayed in a caravan mainly because we wanted to know what cash we had to play with and also self building is stressful enough without worrying about whether or not your house is going to sell at the end of it but it definitely depends on how much you can rough it, my daughter and her husband would love to self build but my daughter could never live like this

[newhome]

3 hours ago, JSHarris said:

I found there were only a few lenders who would offer a mortgage in order to put the funds towards building another house, and that of those that did, the maximum LtV was 50%.

 

It was a while ago so my recollection may be hazy but I don't think I was actually asked what I wanted the remortgage money for TBH. I think I said I was moving house if I said anything at all. I was offered 75% LTV back in 2009 but then the banks all went pop and borrowing became much harder. The only reason I remortgaged was because I didn't sell my house in time (due to the housing market having tanked). Ideally I would have sold well in advance of the money being needed. Thankfully the house sold a few months later but it would have been a complete PITA to have to keep paying a mortgage on a house we couldn't even live in due to it being 400 miles from where the plot was. Personally my preference would be to sell the old house, and be sure of having money in the bank before embarking on a self build, but that's just my personal preference. Can you even get a remortgage AND a self build mortgage at pretty much the same time? 

 

 

[dpmiller]

We remortgaged the current pad to fund our build with Virgin Money with no questions asked, a reasonable rate, and about 85% LTV if I recall correctly.