is it difficult to borrow if you have a deposit

[Amateur bob]

im looking into building a house in the next year or so is it difficult to get a self build mortgage if you own a plot of land and have a deposit of around 100k cash from selling previous house? just wondered if i had to prove income etc im self employed, thanks!

[gravelld]

Normally you have to prove you have some sort of income stream. Depends what you mean by "self employed". If you mean _really_ self employed, i.e. sole trader then you have to show proof of your income into bank accounts. If you mean a company director then you have to show company accounts, proofs of dividends etc.

[Ian]

1 hour ago, Amateur bob said:

just wondered if i had to prove income etc im self employed, thanks!

Normally you’ll need to be able to show them accounts for the last 3 years

[Amateur bob]

is it not possible that i could start the building work with my 100k deposit and get some sort of shell up then borrow against that asset? id prob be looking to spend around 200k in total, is that feasable for a 4 bed house? thanks

[Moonshine]

Typically the max loan they will give you is 4 times your salary, subject to affordability of the loan.

 

https://www.ecology.co.uk/mortgages/residential-mortgages/self-build/

 

So if you already have the land and £100k, then you 'just' need the remaining  build cost from the mortgage (oh and a place to live)

 

if you can prove you earn and can afford to repay the remaining, happy days.

[scottishjohn]

and your age --if older ,that will be a another problem 

you will only know when you start asking ,#

so suggestions from people on here for a good self build mortgages  would help you maybe?

[Amateur bob]

the issue ive got is that although im a partner in the business its only for a small % so if thay start looking at profit of business im only entitled to a small % of the profit in theory? although i take out a lot more each year than the "official" profit share, would this be a problem? also my wife earns 20k a year

[Mr Punter]

Mortgage lenders will want to make sure you have an income that is enough to comfortably pay the interest, plus the capital amount over the mortgage period.  For self build they will want to know you will have sufficient funding to complete the project as they will not want to renegotiate part way through.

 

A multiple of salary is normally a quick and simple way for them to assess how much you can afford. I think you would struggle to borrow more than 4x provable joint income.

 

The days of self cert mortgages are long gone.

 

[Amateur bob]

7 minutes ago, Mr Punter said:

Mortgage lenders will want to make sure you have an income that is enough to comfortably pay the interest, plus the capital amount over the mortgage period.  For self build they will want to know you will have sufficient funding to complete the project as they will not want to renegotiate part way through.

 

A multiple of salary is normally a quick and simple way for them to assess how much you can afford. I think you would struggle to borrow more than 4x provable joint income.

 

The days of self cert mortgages are long gone.

 

Ok well id need to borrow 100k, my wife earns 20 and i withdraw about that from the business BUT my profit share from the business wont be anywhere near as much as that, are they likely to refuse me?

[scottishjohn]

Ok well id need to borrow 100k, my wife earns 20 and i withdraw about that from the business BUT my profit share from the business wont be anywhere near as much as that, are they likely to refuse me?

provided shows on your p6o --then it will be counted  -- dividends will not be included as they could vary,you would need to show they never changed

Edited May 29, 2019 by scottishjohn

[Mr Punter]

15 minutes ago, Amateur bob said:

Ok well id need to borrow 100k, my wife earns 20 and i withdraw about that from the business BUT my profit share from the business wont be anywhere near as much as that, are they likely to refuse me?

 

If they lend 4 x joint, then you would only need to earn £5k together with your wife's £25k. They may do additional affordability tests. Presumably you have no other mortgage?  £200k is very tight for a 4 bed house, so make sure it is very small and simple.

[Amateur bob]

1 hour ago, Mr Punter said:

 

If they lend 4 x joint, then you would only need to earn £5k together with your wife's £25k. They may do additional affordability tests. Presumably you have no other mortgage?  £200k is very tight for a 4 bed house, so make sure it is very small and simple.

thanks ive not actually worked out what it would cost that was just a rough figure, i would aim for a reasonably straightforward square design double storey average kind of size do u think ill be nearer 250k?

[K78]

7 minutes ago, Amateur bob said:

thanks ive not actually worked out what it would cost that was just a rough figure, i would aim for a reasonably straightforward square design double storey average kind of size do u think ill be nearer 250k?

 

I disagree £200k is tight for a 4 bed house. Unless that includes land cost. 

[Amateur bob]

9 minutes ago, K78 said:

 

I disagree £200k is tight for a 4 bed house. Unless that includes land cost. 

no the land is already owned its just build cost im looking for roughly 270m squared between both floors

[Mr Punter]

13 minutes ago, K78 said:

 

I disagree £200k is tight for a 4 bed house. Unless that includes land cost. 

 

2 minutes ago, Amateur bob said:

no the land is already owned its just build cost im looking for roughly 270m squared between both floors

 

@Amateur bob will not build a 270m2 house for £200k. 150m2 may be doable.

[Jeremy Harris]

There is a host of info here about build costs in other threads, and it very much depends on where you are and how much work you can put in yourself.

 

At the lowest end, then Northern Ireland seems to be the least costly place to self-build (based on members here and their experiences).  Doing pretty much all the work yourself you might be able to build for less than £800/m² if you lived there, perhaps a fair bit lower if you know what you're doing and where to buy stuff.

 

If you're in England, and can only do stuff like plumbing, kitchen and bathroom fitting, decorating, heating system installation etc yourself (pretty much what I did) then the costs are more likely to be around £1300 to £1400/m².

 

At £1300/m² then you'd be looking at a total (excluding land) for a 270m² house of about £350k.  Some here have managed to get the costs down closer to £1000/m² with a lot of DIY work, but that's still going to be around £270k for a 270m² house.

[Temp]

14 hours ago, Amateur bob said:

is it not possible that i could start the building work with my 100k deposit and get some sort of shell up then borrow against that asset?

I think that would be difficult.  Many lenders won't lend at all for development projects, they prefer completed houses they can easily sell if it all goes pear shaped.

 

Personally I would keep around £25k (10% of your total budget?) as contingency cash and try and borrow the rest at the outset. Two reasons...

 

1) It's much easier to dip into cash reserves if needed than it is to go back to the bank for more money. In the intervening 12 months the banks policy may have changed or interest rates may have gone up and they might be more reluctant to lend. Your own employment situation might have changed. If you have money left at the end you can always consider repaying some of the mortgage.

 

2) Your lender may only release funds in stages that may not match your expenditure. Perhaps you need to press ahead with one part of the project that doesn't help you achieve a milestone for financing. You might need to buy materials for the next phase before they have made the stage payment for the previous one. Having a cash float can help with that sort of thing. 

 

[Amateur bob]

14 hours ago, JSHarris said:

There is a host of info here about build costs in other threads, and it very much depends on where you are and how much work you can put in yourself.

 

At the lowest end, then Northern Ireland seems to be the least costly place to self-build (based on members here and their experiences).  Doing pretty much all the work yourself you might be able to build for less than £800/m² if you lived there, perhaps a fair bit lower if you know what you're doing and where to buy stuff.

 

If you're in England, and can only do stuff like plumbing, kitchen and bathroom fitting, decorating, heating system installation etc yourself (pretty much what I did) then the costs are more likely to be around £1300 to £1400/m².

 

At £1300/m² then you'd be looking at a total (excluding land) for a 270m² house of about £350k.  Some here have managed to get the costs down closer to £1000/m² with a lot of DIY work, but that's still going to be around £270k for a 270m² house.

this sounds a lot more expensive than i was anticipating, is this with a timber frame or build with blocks? whats the standard kind of size for a 4 bed house is 270sq m considered big?

[Amateur bob]

9 hours ago, Temp said:

I think that would be difficult.  Many lenders won't lend at all for development projects, they prefer completed houses they can easily sell if it all goes pear shaped.

 

Personally I would keep around £25k (10% of your total budget?) as contingency cash and try and borrow the rest at the outset. Two reasons...

 

1) It's much easier to dip into cash reserves if needed than it is to go back to the bank for more money. In the intervening 12 months the banks policy may have changed or interest rates may have gone up and they might be more reluctant to lend. Your own employment situation might have changed. If you have money left at the end you can always consider repaying some of the mortgage.

 

2) Your lender may only release funds in stages that may not match your expenditure. Perhaps you need to press ahead with one part of the project that doesn't help you achieve a milestone for financing. You might need to buy materials for the next phase before they have made the stage payment for the previous one. Having a cash float can help with that sort of thing. 

 

would it be possible to design the house with a main block and sort of wing on the side and get the main block up to start with then build the wing in future years or does it need to match the planning details exactly?

[PeterW]

11 minutes ago, Amateur bob said:

whats the standard kind of size for a 4 bed house is 270sq m considered big?

 

Yep..! You’re into 5 bed territory here, 135sqm downstairs for a standard house is huge, give 50% to kitchen dining and even with a rectangular room you’ve got about 1.5 large shipping containers worth of space which is massive. Average developer 4 bed round here is 165sqm

 

I would consider it in two parts - sleeping and living. If you need 4 bedrooms then a 10m square gives you 4 rooms at 4m square plus bathrooms and circulation space. That’s big. But that is a 200sqm house now, even smaller and potentially cheaper is to go to 10x8 but put a room in the attic so go to 3 floors. Not much extra on the build costs for attic trusses. You’re now at 160sqm standard plus approx 30sqm of attic space. At £1200/sqm you are at £195-220k for the basics plus then the attic conversion 

 

Other option is not to build the full footprint but to go back and create the dining / sunroom type setup later - not as cheap as you won’t get the VAT back but could reduce your costs. 

[Jeremy Harris]

20 minutes ago, Amateur bob said:

this sounds a lot more expensive than i was anticipating, is this with a timber frame or build with blocks? whats the standard kind of size for a 4 bed house is 270sq m considered big?

 

Ours was timber frame, and block and brick may be slightly cheaper, but there isn't a massive amount in it.  Most self builders who only do some of the fitting out work themselves tend to come in at around £1000 to £1500/m² I'd guess.  Those who choose to do almost all the work themselves can come in lower than this, those who opt to use a main contractor will almost certainly come in a fair bit higher.

 

The average size of house in the UK is about 90m².  The average 4 bedroom detached house would be about 140m², perhaps a bit less on a newer estate.  A fairly spacious 4 bedroom detached, developer built, home might be around 180m² or so.  Anything over 200m² tends to have more bedrooms as far as developer built homes go, although self-builders may well do as we've done and forego additional bedrooms to make the rooms larger (our build is 130m², but only 2 bedrooms).  Older houses tend to be bigger than newer houses as a rule.

 

270m² is fairly big for a 4 bedroom detached house, perhaps 100m² or so larger than a decent spec 4 bedroom developer built house.  Not that unusual for a fairly high end self build, though.

[Amateur bob]

2 minutes ago, PeterW said:

 

Yep..! You’re into 5 bed territory here, 135sqm downstairs for a standard house is huge, give 50% to kitchen dining and even with a rectangular room you’ve got about 1.5 large shipping containers worth of space which is massive. Average developer 4 bed round here is 165sqm

 

I would consider it in two parts - sleeping and living. If you need 4 bedrooms then a 10m square gives you 4 rooms at 4m square plus bathrooms and circulation space. That’s big. But that is a 200sqm house now, even smaller and potentially cheaper is to go to 10x8 but put a room in the attic so go to 3 floors. Not much extra on the build costs for attic trusses. You’re now at 160sqm standard plus approx 30sqm of attic space. At £1200/sqm you are at £195-220k for the basics plus then the attic conversion 

 

Other option is not to build the full footprint but to go back and create the dining / sunroom type setup later - not as cheap as you won’t get the VAT back but could reduce your costs. 

i like the idea of adding a bit later to keep costs down, should i include it in the initial planning application or reapply later?

[Amateur bob]

3 minutes ago, JSHarris said:

 

Ours was timber frame, and block and brick may be slightly cheaper, but there isn't a massive amount in it.  Most self builders who only do some of the fitting out work themselves tend to come in at around £1000 to £1500/m² I'd guess.  Those who choose to do almost all the work themselves can come in lower than this, those who opt to use a main contractor will almost certainly come in a fair bit higher.

 

The average size of house in the UK is about 90m².  The average 4 bedroom detached house would be about 140m², perhaps a bit less on a newer estate.  A fairly spacious 4 bedroom detached, developer built, home might be around 180m² or so.  Anything over 200m² tends to have more bedrooms as far as developer built homes go, although self-builders may well do as we've done and forego additional bedrooms to make the rooms larger (our build is 130m², but only 2 bedrooms).  Older houses tend to be bigger than newer houses as a rule.

 

270m² is fairly big for a 4 bedroom detached house, perhaps 100m² or so larger than a decent spec 4 bedroom developer built house.  Not that unusual for a fairly high end self build, though.

would i not be right in saying a developer build 4 bed house feels a bit tight for space inside though? mabye 200m2 is the size to aim for and do away with the garage?

[Jeremy Harris]

1 hour ago, Amateur bob said:

would i not be right in saying a developer build 4 bed house feels a bit tight for space inside though? mabye 200m2 is the size to aim for and do away with the garage?

 

It very much depends on your needs.

 

We built a fairly large 2 bedroom house (~44% bigger than our old 3 bedroom house) because we wanted more space in the ground floor living area, specifically a reasonably sized kitchen, dining room and lounge, plus a utility room and room for each of us to have as a study.  We ended up with two pretty large bedrooms, with a walk-in wardrobe and two bathrooms upstairs, plus a fair bit of "wasted" space in a 6m high entrance lobby.  We could have squeezed a 4 bedroom house on to our house foot print, as the original plans that came with the plot were for a 3 bedroom bungalow.

 

This site gives some rough areas for new builds: https://www.dwh.co.uk/library/Average-UK-house-sizes/

 

They reckon that an average 4 bedroom detached house is around 147m².  I would guess that may seem a bit small for those looking for bigger bedrooms (and it will usually be bedroom size that suffers the most as house size decreases).  180m² to 200m² might be a reasonable aiming point for a fairly spacious 4 bedroom house, it very much depends on your budget and the nature of your site.  The latter almost always dictates the house layout and design more than anything else.

[Amateur bob]

would i be better to look at what mortgage i can get before putting planning in? wouldnt want to get planning for a 250msq house only to then find out the biggest i can afford is 180m2, what would i do then? thanks!