Self Build Mortgage Question

clarelady

We have mortgage approval from BOI for a mtg for 270k (i think 90%) so could look at fully built houses for 300k approx

Now if they were willing to stand over that approval and apply it to a self build instead of a house purchase would the below apply:

Cost to build 270k
Mtg 90% = 243k
Deposit needed = 27k
(Site already gifted )

If when we started building we were able to save money and it only ended up costing us 250k to build, would the bank still give us the 243 K or how would that work ?

archtech

I've come across an instance recently where a bank approved a mortgage for an individual (about the same amount as you have been approved) however when it transpired that the house was yet to be built (by the vendor) the bank insisted on them re-applying for the mortgage as a self build rather than property purchase,(it was a turn key sale) which delayed the process by 6 months or more, so just be cautious.

Also bear in mind that most mortgage approvals have a limit on the length of time for draw down. If going the self build route, in reality you are looking at 6 months at least before you would have planning permission and be in a position to commence on site you offer could be withdrawn.

clarelady

We have planning in place so would be in place to go ahead now if the mortgage approval we have could be applied to a self build we want to do
I am more anxious to hear about what actually happens in relation to the drawdown process. if the house was valued at 270 to build and we were approved for 243k mortgage but as teh build went on ,we changed from upper spec to mid spec so saved 10-20k , can we still get the 243k that the bank approved ?

archtech

Your final drawn down will be dependant on a valuation of the property. In the past once the completed value was more than the required % of the mortgage there wasn't any problems. However it is all dependant on the conditions of offer of the mortgage. BOI require that you spend your % of the loan value before they will let you drawn down any money and normally only pay out 92% of the required payment.

Some banks have introduced a clause requiring the certifier ( Architect/Engineer/Arch Tech/Bldg Surveyor etc) to certify that the specification or extent of works has not changed since mortgage approval.

The goal posts are changing regularly with mortgages, so it can be hard to give definitive advice, even staff in the banks themselves can be slow to commit to advice now.

jakko86

Bank will require a further 10% contingency funds to put with your deposit when your self building afaik.They will then release money at stages during the build once passed and certified by an engineer. they will release 50k and you pay 6k from savings and so on until final draw down and if you dont need that then happy days!Not sure what the procedure is if you have a builder doing full contract which is advisable if your not in the building game?

daver123

Get as much money as possible from the bank on your first draw down it makes things a lot easier go for the maximum amount you can get

archtech

daver123 wrote: »

Get as much money as possible from the bank on your first draw down it makes things a lot easier go for the maximum amount you can get

You will only get as much as is certified and that will be equal or less than the value of work completed.

daver123

I got nearly half the money i borrowed of the ebs on the first draw down and the foundations had just been finished, this was 3 years ago

muffler

daver123 wrote: »

I got nearly half the money i borrowed of the ebs on the first draw down and the foundations had just been finished, this was 3 years ago

Was this agreed in advance with the lender?

daver123

It wasn't agreed beforehand, the solicitor advised me to request as much as possible on the first draw down.

Innish_Rebel

daver123 wrote: »

It wasn't agreed beforehand, the solicitor advised me to request as much as possible on the first draw down.

Would that mean your engineer was willing to tell porkies...:)