Self Build Mortgage Stages

superted81

Hi, Just about to start a self build by direct labour, mortgage offer has been sent out, just curious about the stages. Bank are holding back 20% for the last stage and need a valuation before they will release the last stage payment. If we were to house finished to a stage where we could live in the house, do we have to draw the last the stage? Has any one else been in this position?

Trish56

Usually lenders retains 10% until the property is completed and a final valuation report is submitted. Valuer will need to confirm that the property is fully completed. You only need to drawdown as much as you need however I would recommend that you complete footpaths, driveway, entrance etc. You should inform the lender that you do not need to draw down the balance.

Victor

superted81 wrote: »

Hi, Just about to start a self build by direct labour, mortgage offer has been sent out, just curious about the stages. Bank are holding back 20% for the last stage and need a valuation before they will release the last stage payment. If we were to house finished to a stage where we could live in the house, do we have to draw the last the stage? Has any one else been in this position?

It will need to comply with building regulations. The bank will want the property finished as much as other people could live in it - if it comes to the crunch, tehy don't want to be selling a half-built house. You won't be able to just do two rooms and leave the rest as block walls.

If you are thinking like this, can you really afford it?

Supercell

Hold on for a second!, so if you are self building and say to the bank I want to borrow 200K because thats how much i need to build it, they won't give you the final 40k until its finished?
Surely that doesn't make sense? or will a minimal "builders" finish suffice to release the last 10-20% ? Seems to me that if they want to be able to sell it in the event of a default it should be preferably completed or very close to it.

Victor

Supercell wrote: »

Hold on for a second!, so if you are self building and say to the bank I want to borrow 200K because thats how much i need to build it, they won't give you the final 40k until its finished?
Surely that doesn't make sense? or will a minimal "builders" finish suffice to release the last 10-20% ? Seems to me that if they want to be able to sell it in the event of a default it should be preferably completed or very close to it.

It will depend on the nitty gritty of the contract, but the OP will be expected to spend all their saving first and the may need some form of bridging finance.

Trish56

Am I right Op that you are asking that when the house is complete and you have 40k left to drawdown that if you only need 30k that you can inform the lender you only need 30k. The answer is yes once you are on a variable rate mortgage and of course final stage payment will be subject to the following:
1. Final Valuers report will have to be submitted to lender confirming that the property is completed in full. This includes internal fit out including fitted kitchen, footpaths, boundaries in place, temporary driveway etc.
2. Supervising Architect to submit Certificate of Compliance with planning permission.

superted81

Victor, we will want the house liveable, some rooms that will not be in use will not be furnished but everything else will be done. House will be built to regulations. Gardens\paths etc might not be finished by the stage but would hope to have them complete the following year

superted81

Trish, Kinda, if on the final stage that we can the house complete and the final valuers Report is OK, do we have to draw the last stage. As we have used our money to get the work complete, do we have to make the final draw down. Assuming that we are able to do this financially?

Trish56

Superted81, No you do not have to drawdown what you were approved for if you do not need the funds. I am in the Mortgage business and always encourage my customers to apply for as much as possible as if there are cost over runs it would be very hard if not impossible to get extra money. The customers then only drawdown what they need. In some cases I have got people approved for 230k and they only drewdown 200k no problem.

superted81

Thanks Trish