Chances of self build mortgage approval

shinnywiggles

Hi there,
Wondering if anyone could give me some guidance. I am looking to get a self build mortgage. We have bought a site for €27,000 and have got full planning permission. We have €20,000 left in savings and we would be looking for a mortgage of about €100,000. My boyfriend is a carpenter and is in full-time employment with the same company for the last 7 months, they are also giving him a letter saying that the work will continue. He has been in continuous employment for the last 6 years. He is making €18,200 a year take home pay. I am self employed for just over 2 years and last year i made €10500 take home pay. We are saving about €1500 a month between us, maybe more. My dad and my boyfriend will be doing most of the building of the house, all we really need to get is an electrician and a plumber and they are both friends too so we will be getting a good price. We both live at home and have no dependents and no loans. I'm just wondering what you all think our chances of getting approved are and in your experience what banks are the best to deal with for a self build. Any advice would be appreciated, thanks.

Liam D Ferguson

• What are you paying in rent at the moment?
• Any loans? If so, how much left and how much per month?
• What are you self-employed as?
• What did you earn in your first year?
• Have you audited or unaudited accounts for your first two years?

Ninap

If you have 20k saved and are able to do most of the work yourselves (with assistance from friends), do you need 100k? Might work out less. Good luck anyhow

shinnywiggles

I'm self employed as a beauty therapist. Didn't really take anything for myself for the first year as i was just starting up but had a supplement from the social welfare for the short term enterprise scheme. They are unaudited accounts as far as i know. But they would see from first year to second year of accounts that business is increasing well:) We are both living at home so not paying any rent and we don't have any loans. We could probably build for the less than the 100k but said we should probably ask for that amount as the banks will probably offer us less anyway. Has anyone any experience of this???

gogo

Being realistic ye are on low take home pay, but the fact that you are managing to save 1500pm is good, although any mortgage advisor worth their salt would ask you how you how two people are managing to live on 200euros per week.

Paying rent actually stands to you as it shows that you can manage monthly repayments. I assume all your savings you have are passing through a bank account and can be seen going in every month/week?

From experience I feel that your disposable income might let you down -This means that after you pay the mortgage every month that you wont be left with enough 'disposable' income to live on. You will have all the bills associated with living in your own house not to mention food, clothes etc. Life insurance/home insurance - You are clearly not paying any of this now as you are managing to save 1500pm.

Other than that I would approach a bank with well laid out plans - do your costings out, a basic excel sheet with what this build is going to cost you. Get a builder to do you a quote, are your figures realistic? Coming in too cheap wont work either as the average house costs around 80euro per square foot to build, so if you come in at 50euros per square foot the bank wont approve it either as they will say you cant build it that cheap. Again have your homework done, if its comes in cheap show your figures as to how you are going to achive the build so cheaply. Dont forget that you will need to pay an engineer and a solicitor, you will also need valuations done - have you costed for these? People also always forget that to fit out the house you will also need funds - you cant move in without a kitchen, white goods, heating etc. Go into the meeting with your figures done out - the bank arent going to build the house for you - they want to see that you can get the house built on the money they lend you.

Excel sheet - 1st page is what money you have including mortgage borrowed
- 2nd page is what you need to spend and on what
Both pages should balance

Also your boyf will need to get a letter showing what work his employer has coming up not that he has work. It will need to be fairly specific. Anybody can sign saying they have work, depending on the realtionship your boyf has with his employer this can prove tricky to get sometimes. Your boyfriend would also be considered to be in a high risk job sector for obvious reasons.

to summarise: I feel that your only shortfall is your disposable income - but you are looking for a low enough mortgage. Again any bank should be able to tell you fairly quickly if you meet the critera or not. BOI and AIB are probably the most competitive at the moment, which is also what you should be looking out for - not who's the best for self builds - all banks will be well used to self builds, its the rates you should be checking out, at the end of the day the retes will mean money in you back pocket or not.
Make a few different appointments with different banks and see how you get on.

Best of luck!!

shinnywiggles

Thanks for the reply gogo! Yes all our savings are going through our credit union accounts and we have statements to prove this. I will definatly do up an excel sheet, as i said my bf and dad are doing most of the work so most of the money is for materials. Ya my bf friends employer is doing up a letter detailing the contracts he has coming up so that helps. also i was wondering would the banks take into account the amount we paid for the site as part of our deposit??

shinnywiggles

Thanks for the reply gogo! Yes all our savings are going through our credit union accounts and we have statements to prove this. I will definatly do up an excel sheet, as i said my bf and dad are doing most of the work so most of the money is for materials. Ya my bf friends employer is doing up a letter detailing the contracts he has coming up so that helps. also i was wondering would the banks take into account the amount we paid for the site as part of our deposit??

Liam D Ferguson

shinnywiggles wrote: »

also i was wondering would the banks take into account the amount we paid for the site as part of our deposit??

Yes they will.

shinnywiggles

oh good, i'm hoping this might sway the banks decision! we're hoping to meet with a broker next week. she told me over the phone that ptsb, ics and maybe kbc were our best chance as they take your savings more into account. I'm also going to set up an appointment with boi as they don't deal with brokers and see what they say. Hopefully someone will make us a reasonable offer.....

Liam D Ferguson

shinnywiggles wrote: »

she told me over the phone that ptsb, ics and maybe kbc were our best chance as they take your savings more into account.

Ask the broker to show you AIB interest rates also. AIB are quite competitive on rates at present.

shinnywiggles

ya i know they have the best rates at the moment but she said they would probably not approve us because of the work we are in and she said they are a nightmare to deal with because you could be waiting 4-6 weeks before you hear anything back from them looking for more info and then they could make you wait another 4 weeks after that! She said with the other banks at least you would have an idea within 10days. But she will be applying to all the banks for us anyway so i don't know. All our current accounts and my business account are with aib but that probably doesn't mean anything to them? Is there anyone in a similar situation to us that has been approved lately??? or are we just being totally unrealistic?:o

Liam D Ferguson

shinnywiggles wrote: »

ya i know they have the best rates at the moment but she said they would probably not approve us because of the work we are in and she said they are a nightmare to deal with because you could be waiting 4-6 weeks before you hear anything back from them looking for more info and then they could make you wait another 4 weeks after that! She said with the other banks at least you would have an idea within 10days.

Yes AIB can be painful to deal with but if you give them all the information they require from the start, they will be a lot quicker than that. Besides, your mortgage is something that you'll be paying a LOT of money into so I wouldn't be choosing a lender just because they're a bit faster than another on the processing time.

shinnywiggles wrote: »

All our current accounts and my business account are with aib but that probably doesn't mean anything to them?

On the positive side, AIB do take into account existing relationships with the bank when making decisions. AIB can look back through your accounts for years, while another lender can only see the statements you give them. This can be a good or a bad thing, depending on how good you are at keeping your bank accounts - any referral fees, unauthorised overdrawings etc.?

shinnywiggles

no never any over drawings or missed payments on loans or anything. we'll apply to them anyway and see what happens, fingers crossed!

gogo

Shinnywiggles, why are you going through a broker - why not approach the banks yourself? Yes it means a few different meetings but at least you get to see the critera the banks use. So if you dont meet the critera this time most banks will advise you what to do so that you do meet it.

All banks will take your savings into account. Always wary when I hear a broker involved. take a day off work and try and make a few different appointments, bring a pen and paper and write down everything you need to know and ask any questions you may have and write the answers down for later so you can go over them again.

Also some banks drop the LTV they are willing to lend you when you are broker introduced. For example if bank a gives you 90% of your build cost, when a broker introduces you it drops to 88%.

Very surprised that she didnt mention AIB or BOI - both offer the most competive rates - KBC are way higher at the moment? And BOi are very quick with a response.
Most mortgage advisors like to get a feel for the customers - ie, the person who's sitting in front of them, a mortgage application isnt all about ticking boxes and yes's and no's, I feel that what really makes or breaks it, is the notes that are added by the mortgage advisor at the end of the application. If they have never met you its very hard for them to be enthusastic about you or your build.
Hope this is of some help and let us know how you get on.

killers1

gogo wrote: »

Shinnywiggles, why are you going through a broker - why not approach the banks yourself? Yes it means a few different meetings but at least you get to see the critera the banks use. So if you dont meet the critera this time most banks will advise you what to do so that you do meet it.

All banks will take your savings into account. Always wary when I hear a broker involved. take a day off work and try and make a few different appointments, bring a pen and paper and write down everything you need to know and ask any questions you may have and write the answers down for later so you can go over them again.

Also some banks drop the LTV they are willing to lend you when you are broker introduced. For example if bank a gives you 90% of your build cost, when a broker introduces you it drops to 88%.

Very surprised that she didnt mention AIB or BOI - both offer the most competive rates - KBC are way higher at the moment? And BOi are very quick with a response.
Most mortgage advisors like to get a feel for the customers - ie, the person who's sitting in front of them, a mortgage application isnt all about ticking boxes and yes's and no's, I feel that what really makes or breaks it, is the notes that are added by the mortgage advisor at the end of the application. If they have never met you its very hard for them to be enthusastic about you or your build.
Hope this is of some help and let us know how you get on.

Gogo, apologies but I have to take exception to a lot of what you've posted above. I am a Mortgage Broker so will give you some facts....

A good broker will be able to tell you before the application is submitted whether or not it meets any banks criteria. They will also be able to tell you what needs to change to ensure approval further down the road.

'Also some banks drop their ltv when broker introduced' - That statement is complete nonsense. A banks loan to value policy is set in stone. E.G AIB lend up to 92% - Makes no difference whatsoever whether the application is submitted directly through a branch, via a Broker or online. I'd love to hear which banks you are talking about??

The vast majority of 'Mortgage Advisors' in Branches will not have a tenth of the experience a broker will have, and you're right the notes that accompany the application are what make & break it. Who would you prefer to have writing those notes for you? Bear in mind a 'Mortgage Advisor' in a Bank never ever gets to sit down with the Underwriter....and neither does the applicant whether they apply through a branch or a broker. Just in case you're confused, a broker sends the application directly to the Underwriting Dept and not via a 'Mortgage Advisor' in a Branch....

'If they've never met you it's very hard for them to be enthusiastic about you or your build' - As I said, in any application the applicant never meets the Underwriter.... A broker can be equally (but I would say more) enthusiastic about your build as they are relying on securing mortgage approval for the applicant in order to get paid, the 'Mortgage Advisor' will get their monthly salary irrespective of the outcome of an application....

I'm not knocking you and you are fully entitled to recommend to people to approach banks directly, I have no issue with that at all. I'd just ask you to post correct information if you're going to run down the industry I work in..

Shinnywiggles, if your broker is saying not to apply to AIB as there will be more 'hassle' or paperwork, change your broker. You are the one who will be paying this loan for the next 30 odd years and a difference of 0.5% in the interest rate will cost you €'000 over the long term.

shinnywiggles

Thanks for the all the replies everyone. Killers i've read alot of your replies to other posters and i must say you give great advice! We will be applying to aib through the broker she just doesn't think we will have as much of a chance of getting approved with them as we would have with some of the other banks. We are trying to set up a seperate meeting with boi because they don't deal with our brokers. From your experience killers have you seen anyone in our situation of with our kind of salaries being approved lately???

killers1

shinnywiggles wrote: »

Thanks for the all the replies everyone. Killers i've read alot of your replies to other posters and i must say you give great advice! We will be applying to aib through the broker she just doesn't think we will have as much of a chance of getting approved with them as we would have with some of the other banks. We are trying to set up a seperate meeting with boi because they don't deal with our brokers. From your experience killers have you seen anyone in our situation of with our kind of salaries being approved lately???

Hi Shinnywiggles, thanks for your kind words! In relation to your application there are a couple of things that occurred to me...

1. If your BF is only in his current job 7 months AIB are the only lender that will consider your application at the moment. All the other banks will insist he is with his current employer 1 year before it meets their criteria. You may have to wait a few months before applying elsewhere.

2. In relation to your self employed income the banks will want to see evidence of income earned over the past 2/3 yrs. If you only have 1 yr where you have a taken an income this will be a big hurdle to be overcome.

3. On a positive note, you have excellent savings and a more than proven repayment capacity for the amount you are looking to borrow based on a €1,500pm contribution to your savings account on a monthly basis. This and the fact that you have purchased the site from your own resources is an advantage.

4. Whether your salaries are sufficient to borrow €100k will depend on your ages and the figures your set of accounts will show as gross income taken as drawings & any retained profit.

As you are restricted due to the length of time your BF is in employment I would imagine that if AIB won't do it then you'll need to hold off for a few months, possibly until you have another years set of figures from your business showing and increase in turnover, profit & drawings. It's very hard to give you a definitive indication without actually seeing the paperwork but I'd say at the moment the application is marginal and may have to be put on hold for a while. There's certainly no harm in applying at this stage and if you get put back 5/6 months so be it. The major plus is your savings record, the main negatives are the length of time your BF is with current employer and the figures you can show from your business to date.
Best of luck!

shinnywiggles

I thought most banks just looked for a minimum of 6 months with your current employer no? He has changed jobs a couple of times over the past few years (of course because he works in construction) but he has never been out of work for more than 2 days! Surely that stands for something! We are both 23 years old. I know we might have to wait another 6 months but like most people now we would love to get approved by the end of this year before the interest relief is abolished. we are setting up a meeting with our broker and with boi for next week to get the ball rolling and see what happens.....

killers1

shinnywiggles wrote: »

I thought most banks just looked for a minimum of 6 months with your current employer no? He has changed jobs a couple of times over the past few years (of course because he works in construction) but he has never been out of work for more than 2 days! Surely that stands for something! We are both 23 years old. I know we might have to wait another 6 months but like most people now we would love to get approved by the end of this year before the interest relief is abolished. we are setting up a meeting with our broker and with boi for next week to get the ball rolling and see what happens.....

AIB are the ONLY ones that will assess an application where someone is with their current employer less than 1 year. The fact that he's in the construction industry is a negative as far as the banks are concerned at the moment although at least he has consistent employment within that industry throughout the recession. You'll just have to make an argument along the lines of he changed job to earn more money as opposed to all previous employers went out of business!