Certificates for Stage Payment

HurlingBoy

In the process of a self build and almost at the first stage payment level.The bank has told me that the first stage payment has to come out of my own savings and the mortgage draw down can begin at the second stage payment.

I am wonder is the engineers certificate required to be send to the bank for the first stage payment or is this only required at the second payment when they will actually be releasing money?

sinnerboy

Only your bank can tell you that. Have you not asked them ?

muffler

Thats a question you really should put to the mortgage adviser in the bank that you are dealing with. Having said that I would still submit the payment cert at this stage.

Have to say thats the first time I have heard about a lender expecting the customer to fund the first stage payment. In real terms it really isnt your first stage payment.

archtech

muffler wrote: »

Thats a question you really should put to the mortgage adviser in the bank that you are dealing with. Having said that I would still submit the payment cert at this stage.

Have to say thats the first time I have heard about a lender expecting the customer to fund the first stage payment. In real terms it really isnt your first stage payment.

I came across it last year wit BOI and then the bank turned around an deducted a further 8% retention of the amount certified at each stage payment and that was on top of the retention deducted as part of the administration of the building cost . Figure that one out

daver123

How do they expect you to complete the build if they will not release money thats ridiculous. Your solicitor should contact them and request the money.

sydthebeat

daver123 wrote: »

How do they expect you to complete the build if they will not release money thats ridiculous. Your solicitor should contact them and request the money.

Where did the OP say anything about not releasing money?

The banks want to leave themselves with the least exposure as possible so its sensible to make a self builder use their own funds first.

daver123

If they are not giving the OP the first draw down and forcing the OP to use savings well then that to me reads that they are not releasing the first stage payment. What happens if the OP has to use the savings for a emergency?

sydthebeat

daver123 wrote: »

If they are not giving the OP the first draw down and forcing the OP to use savings well then that to me reads that they are not releasing the first stage payment. What happens if the OP has to use the savings for a emergency?

Incorrect.
There's no mention of withholding the first stage payment. Requiring the OP to use their own money first its completely reasonable, as the deposit is a requirement of getting the mortgage in the first place.

These 'savings' are already tied into the build costs, did you not realist that?

daver123

sydthebeat wrote: »

Incorrect.
There's no mention of withholding the first stage payment. Requiring the OP to use their own money first its completely reasonable, as the deposit is a requirement of getting the mortgage in the first place.

These 'savings' are already tied into the build costs, did you not realist that?

OP i do not agree with sydthebeat, if you do not want to use your savings for the first draw down ask your solicitor to check the terms of yr mortgage agreement.

mj_mam

muffler wrote: »

Have to say thats the first time I have heard about a lender expecting the customer to fund the first stage payment. In real terms it really isnt your first stage payment.

I am in this position also. BOI is requesting that all the savings I declared on the apiation form, be spent before I look for the 1st drawdown.

lollymob

mj_mam wrote: »

muffler wrote: »

Have to say thats the first time I have heard about a lender expecting the customer to fund the first stage payment. In real terms it really isnt your first stage payment.

I am in this position also. BOI is requesting that all the savings I declared on the apiation form, be spent before I look for the 1st drawdown.

Just a quick question! Did they want you to use your deposit money or your entire savings? That's very unfair, surely your savings (separate to your deposit) should be kept for budget over runs?? They're not making it easy for us self builders, especially when we're losing the mortgage interest relief too!

sydthebeat

I'm surprised at the incredulity here.

Its quite simple, say you are offered an 80% mortgage which means you must provide 20% yourself. Personally I think its completely reasonable that a bank would require you to use your own money first to pay for your build and that you should use the money you are borrowing after. What else do you think your deposit on your mortgage its to be used for?

this is not an unusual situation at all in my experience over the last few years.

lollymob

sydthebeat wrote: »

I'm surprised at the incredulity here.

Its quite simple, say you are offered an 80% mortgage which means you must provide 20% yourself. Personally I think its completely reasonable that a bank would require you to use your own money first to pay for your build and that you should use the money you are borrowing after. What else do you think your deposit on your mortgage its to be used for?

this is not an unusual situation at all in my experience over the last few years.

I totally agree of course you have to use your deposit, that makes complete sense! However on a mortgage application you have to declare all your savings! So say you have savings of 50k but your deposit is only 25k! Are they asking you to spend all your savings before you touch their money??

sydthebeat

in my experience, no.

say, the build cost is 200k and theres 5 stages of 40k each. Again, say that its an 80% mortgage that you have been approved for.
It is not at all unusual or unreasonable that the bank will request that you use your 20% deposit to cover the first stage payment.

They cannot ask you to provide more than the required deposit.
as others have said, check the terms and conditions.

To note though, should the build costs go over the projected mortgage, its highly unlikely the bank would offer you more if you have a further 40k sitting in a bank somewhere.

on your last post lollymob, just as a short aside, if you have say 80k savings and you just want to use 40K as a deposit.... its up to the financial institution to agree to that breakdown and offer you a mortgage. From what i have heard, in the case where you had say, 80k savings, its quite possible that the bank may offer you less than the 80% you apply for seeing as you can cover more of the build costs yourself. However, all that 'horse trading' would be carried out before any final approval and letter of offer.
It would also beg the question as to whether its a good idea to borrow more money than you actually have to. Cheap credit is no longer available.

lollymob

sydthebeat wrote: »

in my experience, no.

say, the build cost is 200k and theres 5 stages of 40k each. Again, say that its an 80% mortgage that you have been approved for.
It is not at all unusual or unreasonable that the bank will request that you use your 20% deposit to cover the first stage payment.

They cannot ask you to provide more than the required deposit.
as others have said, check the terms and conditions.

To note though, should the build costs go over the projected mortgage, its highly unlikely the bank would offer you more if you have a further 40k sitting in a bank somewhere.

on your last post lollymob, just as a short aside, if you have say 80k savings and you just want to use 40K as a deposit.... its up to the financial institution to agree to that breakdown and offer you a mortgage. From what i have heard, in the case where you had say, 80k savings, its quite possible that the bank may offer you less than the 80% you apply for seeing as you can cover more of the build costs yourself. However, all that 'horse trading' would be carried out before any final approval and letter of offer.
It would also beg the question as to whether its a good idea to borrow more money than you actually have to. Cheap credit is no longer available.

I think it's best to cover yourself, remember you don't have to draw down the entire mortgage amount you applied for! And I'm hoping I won't have to! No point in going back to bank looking for a top up! I think it would be very unfair of them to expect you to spend your entire savings on the build! People have other things to save for! I have no problem in using the deposit for the 1st stage payment!

muffler

As I said earlier I haven't personally come across a situation where the bank withheld the first stage payment and expected the borrower to fund this entirely out of their savings.

Perhaps this is something that's new(ish) or has been applied by banks in other parts of the country. Where the confusion may arise here is that traditionally (in Donegal anyhow) the lenders (banks and building societies) have issued 92% mortgages with 8% being deducted from each stage payment.

So assuming the OP has a 92% mortgage the first stage payment has most likely been predetermined and is representative of 8% of the mortgage. Swings and roundabouts really.

But people really need to be aware of all these factors and to the best of my knowledge the lender must explain the breakdowns/payments to the borrower. The estimates for the works must be accurate and based on these estimates and the deposits/savings held by the borrower the bank will work out a schedule of payments ensuring that each stage is being adequately funded and that the entire build will be completed within the budget.

Innish_Rebel

sydthebeat wrote: »

in my experience, no.

say, the build cost is 200k and theres 5 stages of 40k each. Again, say that its an 80% mortgage that you have been approved for.
It is not at all unusual or unreasonable that the bank will request that you use your 20% deposit to cover the first stage payment.

They cannot ask you to provide more than the required deposit.
as others have said, check the terms and conditions.

To note though, should the build costs go over the projected mortgage, its highly unlikely the bank would offer you more if you have a further 40k sitting in a bank somewhere.

on your last post lollymob, just as a short aside, if you have say 80k savings and you just want to use 40K as a deposit.... its up to the financial institution to agree to that breakdown and offer you a mortgage. From what i have heard, in the case where you had say, 80k savings, its quite possible that the bank may offer you less than the 80% you apply for seeing as you can cover more of the build costs yourself. However, all that 'horse trading' would be carried out before any final approval and letter of offer.
It would also beg the question as to whether its a good idea to borrow more money than you actually have to. Cheap credit is no longer available.

As a follow up to this.

We experienced the same. using similar numbers to syd's example. We applied for mortgage to build house. Total cost of house - say 200k. We had ~ 100k savings and in application said we'd spend 60k savings for bank to input 140k. Bank agreed mortgage going ahead - 1 major point we had to put in the 60k first which I think is what the OP is experiencing... They never made any mention of the additional savings we have. Our application was based upon what we said we were willing to use for the build.

I would guess if the build cost was 200k and you had 100k savings and told the bank you wanted 180k mortgage maybe then they would question why you wewren't spending more of your savings. The come back of cost overruns would lead to questions as to if you're submitted costings are accurate.