Bank Overestimating Building Cost for Mortgage?

Triton

Okay, so I was in with the bank the other day. My partner and I have 30k savings and the architect says we can build our house for 200k. I think we mightn't be able to finish it fully for that but we'll definitely have enough finished to be able to move in (we mightn't complete an upstairs bathroom or maybe the sun room if things get tight).

Therefore we are looking for 170k as we have 15k elsewhere that we can get our hands on if needed so we thought 215k would leave us breathing room, plus we'll probably save another bit saved before we even start and before the full mortgage is drawn down (we are saving 1250e each month between us).

However, the house is 293 square metres (about 3100 square foot) and the bank official said her one worry is that we won't be able to complete it for 200k. The AIB form she had said a house direct build should cost €90 per square metre, meaning we'd need 263,700. That sounds far too high I think.

One of my brother's will be digging the foundations for us (we have a digger on the farm), and my other brother is a carpenter so he will do any of the wood work (roof, hanging doors, etc.) in the house so that will help us too. I explained that to her but it seemed to me like their €90 a square metre was way over the top. Our architect had told us builders charge €82 a square foot and even that would only be 254k so would be less. We're going direct build though.

We already have a 200k mortgage on the house we're living in so that is why we didn't want to ask for too much as we thought we'd be going too high (combined mortgages are 360k to 370k) and they'd refuse us. Has anyone had any similar problems with their bank?

Could they really decline us because they think we aren't looking for enough money?

reilig

That's what happened for me too, Our mortgage was approved for €250,000. We had to get our engineer to send in a price schedule for this amount to show that it could be done for this. Reality is that we will only take €170k.

So even if you apply for €300k and only draw €200k, you will only have to make repayments on what you draw. So apply for as much as the bank advises and only draw what you need. Its easier in the long run.

Triton wrote: »

Okay, so I was in with the bank the other day. My partner and I have 30k savings and the architect says we can build our house for 200k. We mightn't be able to finish it fully for that but we'll definitely have enough finished to be able to move in (we mightn't complete an upstairs bathroom or maybe the sun room).

Therefore we are looking for 170k as we have 15k elsewhere that we can get our hands on if needed so we thought 215k would leave us breathing room, plus we'll probably save another bit before we even start and before the full mortgage is drawn down (we are saving 1250e each month between us).

However, the house is 293 square metres (about 3100 square foot) and the bank official said her one worry is that we won't be able to complete it for 200k. The AIB form she had said a house direct build should cost €90 per square metre, meaning we'd need 263,700. That sounds far too high I think.

One of my brother's will be digging the foundations for us (we have a digger on the farm), and my other brother is a carpenter so he will do any of the wood work (roof, hanging doors, etc.) in the house so that will help us too. I explained that to her but it seemed to me like their €90 a square metre was way over the top.

We already have a 200k mortgage on the house we're living in so that is why we didn't want to ask for too much as we thought we'd be going too high and they'd refuse us. Has anyone had any similar problems with their bank?

Could they really decline us because they think we aren't looking for enough money?

Triton

reilig wrote: »

That's what happened for me too, Our mortgage was approved for €250,000. We had to get our engineer to send in a price schedule for this amount to show that it could be done for this. Reality is that we will only take €170k.

So even if you apply for €300k and only draw €200k, you will only have to make repayments on what you draw. So apply for as much as the bank advises and only draw what you need. Its easier in the long run.

Will they come back and tell us the amount we can get approved for though or would they just say no?

Like would they come back and say, yas want 170k but we think yas should get 190k and you are approved for that?

reilig

Triton wrote: »

Will they come back and tell us the amount we can get approved for though or would they just say no?

Like would they come back and say, yas want 170k but we think yas should get 190k and you are approved for that?

They won't come back and tell you how much you will be approved for. They will either approve you for enough to finish the house or they will refuse you. Remember, in simple terms, when you have a mortgage on the house, then the bank technically owns the house. So they will want to ensure that the house is finished so they will only approve you for the amount that an engineer tells them that it will take to completely finish the house (including landscaping). Unless you have money saved which they will subtract from this approval figure.

Hope it makes sense

muffler

The banking forum is probably the obvious place for this but the lads over in the Accommodation & Property forum are always very helpful so I'll move it there.

Triton

reilig wrote: »

They won't come back and tell you how much you will be approved for. They will either approve you for enough to finish the house or they will refuse you. Remember, in simple terms, when you have a mortgage on the house, then the bank technically owns the house. So they will want to ensure that the house is finished so they will only approve you for the amount that an engineer tells them that it will take to completely finish the house (including landscaping). Unless you have money saved which they will subtract from this approval figure.

Hope it makes sense

My architect has provided a costing analysis saying that the home can be built for 200k. We have 45k worth of savings. 30k we want to use for the house and 15k we want to hold back.

If they decline us saying we aren't looking for enough, can we reapply for a higher amount?

reilig

Triton wrote: »

My architect has provided a costing analysis saying that the home can be built for 200k. We have 45k worth of savings. 30k we want to use for the house and 15k we want to hold back.

If they decline us saying we aren't looking for enough, can we reapply for a higher amount?

They shouldn't decline you on the basis that you haven't applied for enough if the Architect has given that figure. I'm sure you can reapply if you want to.

Triton

reilig wrote: »

They shouldn't decline you on the basis that you haven't applied for enough if the Architect has given that figure. I'm sure you can reapply if you want to.

Thanks for your help.

mr_edge_to_you

Found high street banks very difficult to deal with. Make an appointment to see a broker. They have more options open to them including one lender who seems to be more sympathetic to the self-builder!!

Victor

In the current market, the banks aren't going to put themselves out on a limb for anyone.

Triton wrote: »

My architect has provided a costing analysis

And you believed an architect? Does your architect have any training or qualifications in cost estimation?

While you think you might be able to get your brothers to do some of the work, what if they can't and you have to hire someone?

bertie1

I built a few houses over the years and I could say for certain it will go about 15% over budget unknown to you , there are extras & little changes everywhere that you didn't spot at the start.

ZYX

Triton wrote: »

My architect has provided a costing analysis saying that the home can be built for 200k. We have 45k worth of savings. 30k we want to use for the house and 15k we want to hold back.

If they decline us saying we aren't looking for enough, can we reapply for a higher amount?

Why are you basing cost on what architect says? They usually way underestimate. Why not send plans out to tender and get the actual price?

muffler

ZYX wrote: »

Why are you basing cost on what architect says? They usually way underestimate.

I dont think so. If anything it would be an over estimation a lot of times.

ZYX wrote: »

Why not send plans out to tender and get the actual price?

That would need to be done at some stage but better sooner than later.