Self build mortgage?

shelly4720

Hi all,
I'm wondering if anyone can tell me do aib give mortgages for self builds? Also to calculate the LTV do I use build cost plus site to represent value?
Is there a better bank out there for self builds, AIBs rate seems to be the best.

killers1

shelly4720 wrote: »

Hi all,
I'm wondering if anyone can tell me do aib give mortgages for self builds? Also to calculate the LTV do I use build cost plus site to represent value?
Is there a better bank out there for self builds, AIBs rate seems to be the best.

Hi Shelly,
AIB do self build mortgages. Other banks do self build mortgages too and they all have differing criteria. They look for you to put your equity input in at the site purchase stage. The will lend up to 92% of the value on completion. How this works as a practical example would be as follows:

Say your site purchase is €80,000 the build cost is €170,000 and you have 20k savings to put towards the purchase. They will lend you €60,000 towards the site purchase (75% of €80k) and then fund 100% of the construction cost (€170,000). The total they will have lent by the end of the build is €230,000 which is 92% of €250,000.

Hope this clarifies, any queries let me know!

shelly4720

Thanks killers1, still confused re the LTV and if we could qualify for 50 - 80%LTV rate. Am I right in saying the value is build cost plus site cost?

killers1

shelly4720 wrote: »

Thanks killers1, still confused re the LTV and if we could qualify for 50 - 80%LTV rate. Am I right in saying the value is build cost plus site cost?

The value is determined by the bank's valuer when he inspects the site and views the plans for the property. The value will not necessarily be equal to the cost of site + cost of build & in the majority of cases the value on completion will be higher. How far along are you on this? Can you give me site value? build cost? & your equity input and I'll give you an idea of your LTV to see if you are in the 50-80% range...

shelly4720

Site cost is 25k, build cost 220k and equity of 75k, thanks again!

killers1

No problem, you'll definitely be in the 50-80% LTV bracket.
Cost of Site + Cost of Build = €245k
Less equity input = €75k
Mortgage Required = €170k

So €170k is 69.38% of €245k so LTV is 69%. Even if the valuation comes in higher than the site + build costs combined (€245k) it won't be high enough to bring you into the less than 50% rate bracket. You'll definitely be in the 3.04% AIB rate bracket...(50-80%)

shelly4720

Thanks so much, really appreciate that, you've put my mind at ease!

killers1

shelly4720 wrote: »

Thanks so much, really appreciate that, you've put my mind at ease!

No problem, my pleasure! Best of luck!

lollymob

killers1 wrote: »

No problem, you'll definitely be in the 50-80% LTV bracket.
Cost of Site + Cost of Build = €245k
Less equity input = €75k
Mortgage Required = €170k

So €170k is 69.38% of €245k so LTV is 69%. Even if the valuation comes in higher than the site + build costs combined (€245k) it won't be high enough to bring you into the less than 50% rate bracket. You'll definitely be in the 3.04% AIB rate bracket...(50-80%)

Hi killers1, I found the above posts to be very well explained and easy to understand so I hope you don't mind me asking you a question! I am in a similar situation and will be hoping to get a self build mortgage later in year once pp has been granted! I will be building on a site that has been gifted to me and have no idea of it's value! I am aware that bank have to value it so I'm wondering how this will affect my mortgage! I will be hoping to borrow 200,000 and have a deposit! I'm sorry if I'm not making sense!
Thanking you in advance!

killers1

lollymob wrote: »

killers1 wrote: »

No problem, you'll definitely be in the 50-80% LTV bracket.
Cost of Site + Cost of Build = €245k
Less equity input = €75k
Mortgage Required = €170k

So €170k is 69.38% of €245k so LTV is 69%. Even if the valuation comes in higher than the site + build costs combined (€245k) it won't be high enough to bring you into the less than 50% rate bracket. You'll definitely be in the 3.04% AIB rate bracket...(50-80%)

Hi killers1, I found the above posts to be very well explained and easy to understand so I hope you don't mind me asking you a question! I am in a similar situation and will be hoping to get a self build mortgage later in year once pp has been granted! I will be building on a site that has been gifted to me and have no idea of it's value! I am aware that bank have to value it so I'm wondering how this will affect my mortgage! I will be hoping to borrow 200,000 and have a deposit! I'm sorry if I'm not making sense!
Thanking you in advance!

Hi Lollymob,
No problem at all! The value of your site will be factored in as part of your overall loan to value. Say for example your site is valued at 60k and the build cost is 200k and the valuer indicates the property will be worth 260k on completion then the bank could in theory lend you the full amount you need to build the house (presuming you qualify for the mortgage). Your loan to value would be 77% (200\260). You wouldn't necessarily need an 8% deposit as your equity input is the site value but the bank will want to see that you have savings to cover any cost overruns etc..hope this helps & if you need anything else let me know...you could always ask a local estate agent or Valuer to give you an idea if what your site would be worth with PP

grayman

killers1 wrote: »

Hi Lollymob,
No problem at all! The value of your site will be factored in as part of your overall loan to value. Say for example your site is valued at 60k and the build cost is 200k and the valuer indicates the property will be worth 260k on completion then the bank could in theory lend you the full amount you need to build the house (presuming you qualify for the mortgage). Your loan to value would be 77% (200\260). You wouldn't necessarily need an 8% deposit as your equity input is the site value but the bank will want to see that you have savings to cover any cost overruns etc..hope this helps & if you need anything else let me know...you could always ask a local estate agent or Valuer to give you an idea if what your site would be worth with PP

Hi Killers 1. I also found the posts interesting. You might ansber this if you can. We recently applied for a mortgage and got turned down. We own the site our self and have got full pp on it so have spent all our savings on that so have no money to put towards the build. we looked to borrow 150000 and had to get the site valued which was valued at 210000 because of its location in dublin, we alsso have to get a value of it all when the build was finished at it came in a 525000 so the bank put a value of 360000 on it until it is build which is a LTV of 42% but then said we could not afford to pay it back even though the mortgage payment per month is 210 less than our current rent which we can more than afford so I dont get it. I thought we were in a really good place with owing the site and getting the full pp on it. Any advice??:)

killers1

grayman wrote: »

Hi Killers 1. I also found the posts interesting. You might ansber this if you can. We recently applied for a mortgage and got turned down. We own the site our self and have got full pp on it so have spent all our savings on that so have no money to put towards the build. we looked to borrow 150000 and had to get the site valued which was valued at 210000 because of its location in dublin, we alsso have to get a value of it all when the build was finished at it came in a 525000 so the bank put a value of 360000 on it until it is build which is a LTV of 42% but then said we could not afford to pay it back even though the mortgage payment per month is 210 less than our current rent which we can more than afford so I dont get it. I thought we were in a really good place with owing the site and getting the full pp on it. Any advice??:)

Hi grayman, I'll try my best to answer it for you. The banks decision to lend is twofold. One is the security on offer (i.e. the property you are buying/building etc). In your case the security you were offering the bank is absolutely fine as it is a low loan to value so they would have had no issue with that part of your application. The second part of an application is the credit underwriting. This is where they assess you ability to repay the mortgage. There are a huge amount of variables to this. The 2 main points are that your gross annual income when put through their calculators has to allow you to borrow the amount required. If it does then they will look at the stressed repayment on the proposed mortgage & any other loans etc that you have to see if it fits into their criteria. They then look for evidence from you that you have proven that you can afford over and above the monthly repayments. The one area where banks have tightened up on self builds is in the area of cost overruns. Were you proposing to build the property using Direct Labour or by way of Fixed Price Contract? The former of these is seen as more riskier by the lender and the one most likely to lead to cost overruns. You say that you used all your savings on the site purchase? My initial reaction is that they have turned you down because you don't have sufficient funds left over to cover any unexpected cost overruns. If you want me to fully assess your credit situation to see for definite why you were refused I would need you to send me the following info (by PM is fine if you'd prefer?)
Your ages
Do you have kids?
Employment details, occupation, salary, length of time in roles? permanent?
Savings build up, how much? how much per month? for how long?
Cost of site? Did you buy the site outright yourselves?
Any other borrowings?
How long are you renting? how much per month? is it paid through your bank a/c?
Are you building by Direct Labour or Fixed Price Contract?
What bank did you apply to?
On receipt of the above I should be able to give you a fairly accurate idea of where you stand, why you were declined and whether you would have a better chance with a different lender.
I hope this helps!

grayman

killers1 wrote: »

Hi grayman, I'll try my best to answer it for you. The banks decision to lend is twofold. One is the security on offer (i.e. the property you are buying/building etc). In your case the security you were offering the bank is absolutely fine as it is a low loan to value so they would have had no issue with that part of your application. The second part of an application is the credit underwriting. This is where they assess you ability to repay the mortgage. There are a huge amount of variables to this. The 2 main points are that your gross annual income when put through their calculators has to allow you to borrow the amount required. If it does then they will look at the stressed repayment on the proposed mortgage & any other loans etc that you have to see if it fits into their criteria. They then look for evidence from you that you have proven that you can afford over and above the monthly repayments. The one area where banks have tightened up on self builds is in the area of cost overruns. Were you proposing to build the property using Direct Labour or by way of Fixed Price Contract? The former of these is seen as more riskier by the lender and the one most likely to lead to cost overruns. You say that you used all your savings on the site purchase? My initial reaction is that they have turned you down because you don't have sufficient funds left over to cover any unexpected cost overruns. If you want me to fully assess your credit situation to see for definite why you were refused I would need you to send me the following info (by PM is fine if you'd prefer?)
Your ages
Do you have kids?
Employment details, occupation, salary, length of time in roles? permanent?
Savings build up, how much? how much per month? for how long?
Cost of site? Did you buy the site outright yourselves?
Any other borrowings?
How long are you renting? how much per month? is it paid through your bank a/c?
Are you building by Direct Labour or Fixed Price Contract?
What bank did you apply to?
On receipt of the above I should be able to give you a fairly accurate idea of where you stand, why you were declined and whether you would have a better chance with a different lender.
I hope this helps!

Thanks for the reply it really helps. The main reason they said they were refusing us was becauce we they stressed tested we should be left we 2250 per month but we would only be left with 2115 per month (135 per month short). we have got pay rises since which works out at 150 after tax per month so we now answer the main fefussal point. We are self building (direct labour) build cost is coming in a 152000 we want to borrow 150000 and have a few grand in savings and also getting a small gift from family to cover any over run. so i suppose my next question is do we re apply now or wait till we save a bit more.

killers1

grayman wrote: »

Thanks for the reply it really helps. The main reason they said they were refusing us was becauce we they stressed tested we should be left we 2250 per month but we would only be left with 2115 per month (135 per month short). we have got pay rises since which works out at 150 after tax per month so we now answer the main fefussal point. We are self building (direct labour) build cost is coming in a 152000 we want to borrow 150000 and have a few grand in savings and also getting a small gift from family to cover any over run. so i suppose my next question is do we re apply now or wait till we save a bit more.

Am I right in assuming you applied to AIB and have 1 dependent? As I said if you want to PM me the answers to my questions above I can answer your question as to whether you should apply now & where to etc...Without those answers I can't really give you an accurate assessment..

lollymob

killers1 wrote: »

lollymob wrote: »

killers1 wrote: »

No problem, you'll definitely be in the 50-80% LTV bracket.
Cost of Site + Cost of Build = €245k
Less equity input = €75k
Mortgage Required = €170k

So €170k is 69.38% of €245k so LTV is 69%. Even if the valuation comes in higher than the site + build costs combined (€245k) it won't be high enough to bring you into the less than 50% rate bracket. You'll definitely be in the 3.04% AIB rate bracket...(50-80%)

Hi killers1, I found the above posts to be very well explained and easy to understand so I hope you don't mind me asking you a question! I am in a similar situation and will be hoping to get a self build mortgage later in year once pp has been granted! I will be building on a site that has been gifted to me and have no idea of it's value! I am aware that bank have to value it so I'm wondering how this will affect my mortgage! I will be hoping to borrow 200,000 and have a deposit! I'm sorry if I'm not making sense!
Thanking you in advance!

Hi Lollymob,
No problem at all! The value of your site will be factored in as part of your overall loan to value. Say for example your site is valued at 60k and the build cost is 200k and the valuer indicates the property will be worth 260k on completion then the bank could in theory lend you the full amount you need to build the house (presuming you qualify for the mortgage). Your loan to value would be 77% (200\260). You wouldn't necessarily need an 8% deposit as your equity input is the site value but the bank will want to see that you have savings to cover any cost overruns etc..hope this helps & if you need anything else let me know...you could always ask a local estate agent or Valuer to give you an idea if what your site would be worth with PP

Thanks a million for that reply killers1! Very well explained as always!
Regards,
Lollymob

0utandAbout

Hi All
Can I ask a related question - for a self build mortgage what is included in the total cost of the build? On top of the actual builder's cost, can any professional fees be included? And what about the development contribution?
Thanks!!

killers1

0utandAbout wrote: »

Hi All
Can I ask a related question - for a self build mortgage what is included in the total cost of the build? On top of the actual builder's cost, can any professional fees be included? And what about the development contribution?
Thanks!!

If your loan to value allows i.e overall loan is less than 92% of the value of the completed property you can include all of those items as they all form part of the costs of constructing the property. The main thing is the loan to value and obviously that you qualify to borrow the amount required.

0utandAbout

Thanks a mil killers1!
only at early stages now of our planning/design but just trying to get my head around the finances. : )

killers1

0utandAbout wrote: »

Thanks a mil killers1!
only at early stages now of our planning/design but just trying to get my head around the finances. : )

Exciting times! If you've any other queries at any stage let me know!

0utandAbout

killers1 wrote: »

0utandAbout wrote: »

Thanks a mil killers1!
only at early stages now of our planning/design but just trying to get my head around the finances. : )

Exciting times! If you've any other queries at any stage let me know!

Thanks! No doubt I'll be struggling over coming months figuring it out....have to say have found your posts on here really helpful!

killers1

0utandAbout wrote: »

Thanks! No doubt I'll be struggling over coming months figuring it out....have to say have found your posts on here really helpful!

Thanks a mill! Nice to be appreciated!

Elledix

Hi,

Can i ask the probability of getting self-build mortgage with my own circumstances. We own the site, have €20k savings (from him much more than me)(he is self-employed and i am in fulltime employment for 6 years) and have a cost of €150,000 for the build. I was recently advised to contact AIB/BOI as they were the only banks really giving out mortgages.

We are just at the initial stages of starting to talk to the banks. Just wondering if anyone has an idea of times from approval from banks, if or if you think we need more savings etc. etc.
Thanks,

killers1

Elledix wrote: »

Hi,

Can i ask the probability of getting self-build mortgage with my own circumstances. We own the site, have €20k savings (from him much more than me)(he is self-employed and i am in fulltime employment for 6 years) and have a cost of €150,000 for the build. I was recently advised to contact AIB/BOI as they were the only banks really giving out mortgages.

We are just at the initial stages of starting to talk to the banks. Just wondering if anyone has an idea of times from approval from banks, if or if you think we need more savings etc. etc.
Thanks,

Hard to give you an indication based on that info, would need to know ages, dependents, salaries, monthly rent, savings contributions, whether you bought or were gifted site, fixed price contract or direct labour etc etc... If you are putting the €20k towards the construction cost then you don't have funds left over for cost overruns etc.. There are a huge amount of variables to each application and impossible to give an accurate answer without all the details. In terms of the timeframe for approval you should have word back from the banks in a week or two provided you supply all the relevant info at the start and they don't need to keep coming back looking for additional documentation.

Elledix

More info...

salaries are €34k & €25k, age 31 & 30, no dependants, he lives at home (no rent), I pay rent of €320 per month, monthly savings of €1000pm (combined), the site was gifted and we have a fixed price contract for the build. I hope this is enough info...

killers1

Elledix wrote: »

More info...

salaries are €34k & €25k, age 31 & 30, no dependants, he lives at home (no rent), I pay rent of €320 per month, monthly savings of €1000pm (combined), the site was gifted and we have a fixed price contract for the build. I hope this is enough info...

Sounds fine, salary is more than sufficient to borrow that amount and you have a proven repayment capacity for €1,320pm (presuming you've been saving at that level for a while and rent is paid through your accounts). The fact that you have a fixed price contract means less chance of cost overruns so I'd say on the face of it you'll qualify.

Elledix

Thanks for the advice!! What is it about applying for mortgages that turns people into quivering wrecks looking for reassurance everywhere:D:)

killers1

Elledix wrote: »

Thanks for the advice!! What is it about applying for mortgages that turns people into quivering wrecks looking for reassurance everywhere:D:)

You'll be fine, stop stressing about it!!

Rebel1977

Whats better direct labour or fixed price contract ?

What paperwork do banks require for each stage of the drawdown for the above ?

killers1

Rebel1977 wrote: »

Whats better direct labour or fixed price contract ?

What paperwork do banks require for each stage of the drawdown for the above ?

You could write a 5 page answer to that question....!

Basically direct labour tends to work out cheaper as you are employing the contractors directly and negotiate on each of the jobs to be done. It can be a lot of hassle if you are managing the project yourself and need to have the skills to organise the correct tradesmen to arrive at the correct time & also arranging delivery of building materials etc... It's a good route to go down if you have someone competent in the building trade to oversee the project for you. The fixed price contract tends to be more expensive but on the flip side you have agreed a price with a builder to deliver a completed property. Again you'll need someone competent to oversee the project for you. I would base my decision on the person who is going to manage everything and if that person is you then be prepared for a lot more hassle going the direct labour route.

For stage payment drawdowns you'll need your supervising architect/engineer to sign off on the value of works completed to date & that the property is on course to come in on budget.

Duffers11

Hi there, find your answers very informative so hope you don't mind if I throw one in...Have been gifted a site, purchased for 100k by my parents, planning permission received. Have a salary of 31k, with about 2k overtime guaranteed per annum, no kids, no loans or cc, save €800pm and have approx 11k savings. Looking for 100% construction costs mortgage as site is in place, first of all is this ok or have things changed? So far, I applied to my own bank UB which have called me to say its approved but are looking for a letter to state that my parents have paid the architect fees and solicitor fees etc which they have, is this ok to give, will it ever come back on my parents? They are offering 155k fir the build, my fiancé and family are building the house so very little labour costs, by he way I applied as a single applicant for mortgage. I was hoping to go with AIB for a mortgage as they're rates seem far less that other banks, at first they said they would give me €170k (monthly repayments were nearly the same with the rate difference) but called them today and said it had been refused. I'm now worried that it will go on file that I have been refused by AIB and it will affect my chances with proceeding?? Can I now re- apply to AIB for the lower amount of 155k or how do I go about this?? Also, my solicitor told me today that as part of getting the mortgage that the applicant now has to pay the banks solicitors fees, is this true??? Apparently it was only recently brought it, I nearly died..!! So sorry for such a long rant, would just love some advice as to hwhat o do next, whether to just accept the higher rate mortgage with UB as don't want to push my luck!!! Thanks a mill

killers1

Duffers11 wrote: »

Hi there, find your answers very informative so hope you don't mind if I throw one in...Have been gifted a site, purchased for 100k by my parents, planning permission received. Have a salary of 31k, with about 2k overtime guaranteed per annum, no kids, no loans or cc, save €800pm and have approx 11k savings. Looking for 100% construction costs mortgage as site is in place, first of all is this ok or have things changed? So far, I applied to my own bank UB which have called me to say its approved but are looking for a letter to state that my parents have paid the architect fees and solicitor fees etc which they have, is this ok to give, will it ever come back on my parents? They are offering 155k fir the build, my fiancé and family are building the house so very little labour costs, by he way I applied as a single applicant for mortgage. I was hoping to go with AIB for a mortgage as they're rates seem far less that other banks, at first they said they would give me €170k (monthly repayments were nearly the same with the rate difference) but called them today and said it had been refused. I'm now worried that it will go on file that I have been refused by AIB and it will affect my chances with proceeding?? Can I now re- apply to AIB for the lower amount of 155k or how do I go about this?? Also, my solicitor told me today that as part of getting the mortgage that the applicant now has to pay the banks solicitors fees, is this true??? Apparently it was only recently brought it, I nearly died..!! So sorry for such a long rant, would just love some advice as to hwhat o do next, whether to just accept the higher rate mortgage with UB as don't want to push my luck!!! Thanks a mill

Hi Duffers11,
Wow you managed to squeeze a lot of questions in there!! I'll try to answer them in the order you have them above (in bold).
1. Ok to fund 100% of the construction costs when you have a site worth €100k as equity towards the build. If your borrowing €155k and your value on completion is €255k your loan to value is only 60% and well within Bank's policies.
2. The fact that you applied to AIB and have been declined will have no bearing on your ability to proceed with UB. Have you been given the reasons that you were declined? Are you building using direct labour or by way of fixed price contract with your fiance's family? Did AIB know which route you were going down before decision changed? Bank's view direct labour as a more riskier type of lending and would like to see you have further savings than €11k to cover any cost overruns.
3. Re-applying with AIB and whether it's worth your while doing so will purely depend on the reasons that you were declined? (If you can let me know what they said I can tell you whether it's worth your while and how you should go about it)
4. The Bank do not employ a separate solicitor to deal with a self build or a standard house purchase and your solicitor is allowed to do all the legal work involved with the transaction. I would be wary of this being an attempt by your solicitor to bump up the fees they are charging you.
If you can answer the questions above in relation to the response from AIB I might be able to throw some more light on this for you....