Self build Mortgage contribution problem

butsy1981

I originally posted this in the Banking forum but didn't get any responses, I'm hoping this forum would be more relevant. I apologise if I've broken any rules by posting in 2 different forums, please remove the other thread if needed

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I’m curious if anyone has ever encountered an issue I’m currently having with a mortgage application with my bank (AIB).
I got a sanction in principal of €255K for land and a self-build mortgage easy enough, but now that it’s come time to get the final letter of offer, the bank seems to be throwing all manner of obstacles in the way. The latest one has me going around in circles with them and I can’t seem to convince the mortgage advisor and deputy branch manager that what they are suggesting is nonsense. The breakdown of my costs as per my architects costing is as follows:
Land: €70K
Build: €223,500
Fees: €9500 (The outstanding balance is €7,500 as I’ve paid 2K already)
My Current Savings: €46K

I’ve dealt with 5 different Mortgage advisors since I first lodged my application nearly a year ago and each one advised that the bank would not contribute anything to build related fees such as county council fees, stamp duty etc and I always said that was fine as I would pay these from my savings separately.
As the total cost of build and land is €293500 and the mortgage is 255K I was expecting my contribution to be 38,500 and the remainder of my savings would be used to pay the balance of the fees.
However I got an email from the mortgage advisor saying that the home loans dept were looking for a contribution of €48K from me towards the first draw down for the land and that they would only give €22K. I immediately questioned this and was told that they were looking at the overall project cost of €303K (including fees) and therefore my contribution of €48K had to be used upfront.
I tried explaining that this didn’t make sense because I had been informed that fees were separate and that if the bank only contributed €22K to the land and €223,500 to the build then there would be €9500 unused in the mortgage at the end of the project, whereas I wouldn’t have enough savings to pay my upfront fees at the start.
In my latest meeting with the deputy branch manager, she said that I could draw down the fees as part of the stage payments which contradicted what I had been told previously, but I also pointed out that at least €5,500 of this needed to be paid to the council and on stamp duty before I ever broke ground. She then started talking about bridging loans which I thought was ridiculous as the money is there it’s just that they are trying to force me to use it for the wrong thing. They are also not factoring that I’ve already paid €2K of fees and therefore no longer have €48K in savings.
I’ve lost all confidence in my branch representatives and I suspect a lot of these issues are arising from the fact that they didn’t explain my financial position to the home loans dept correctly to begin with. I am now wondering if I could deal directly with the home loans department to make them see sense, though I don’t want to make trouble because at the end of the day I just want this mortgage finalised so that I can start building. I’ve also considered applying to other banks but I don’t have a consistent savings for the past 6 months which apparently all banks now want to see as they are stress testing applicants against a 6.5% interest rate.

Any advice or feedback on similar experiences would be appreciated.

killers1

butsy1981 wrote: »

I originally posted this in the Banking forum but didn't get any responses, I'm hoping this forum would be more relevant. I apologise if I've broken any rules by posting in 2 different forums, please remove the other thread if needed

---

I’m curious if anyone has ever encountered an issue I’m currently having with a mortgage application with my bank (AIB).
I got a sanction in principal of €255K for land and a self-build mortgage easy enough, but now that it’s come time to get the final letter of offer, the bank seems to be throwing all manner of obstacles in the way. The latest one has me going around in circles with them and I can’t seem to convince the mortgage advisor and deputy branch manager that what they are suggesting is nonsense. The breakdown of my costs as per my architects costing is as follows:
Land: €70K
Build: €223,500
Fees: €9500 (The outstanding balance is €7,500 as I’ve paid 2K already)
My Current Savings: €46K

I’ve dealt with 5 different Mortgage advisors since I first lodged my application nearly a year ago and each one advised that the bank would not contribute anything to build related fees such as county council fees, stamp duty etc and I always said that was fine as I would pay these from my savings separately.
As the total cost of build and land is €293500 and the mortgage is 255K I was expecting my contribution to be 38,500 and the remainder of my savings would be used to pay the balance of the fees.
However I got an email from the mortgage advisor saying that the home loans dept were looking for a contribution of €48K from me towards the first draw down for the land and that they would only give €22K. I immediately questioned this and was told that they were looking at the overall project cost of €303K (including fees) and therefore my contribution of €48K had to be used upfront.
I tried explaining that this didn’t make sense because I had been informed that fees were separate and that if the bank only contributed €22K to the land and €223,500 to the build then there would be €9500 unused in the mortgage at the end of the project, whereas I wouldn’t have enough savings to pay my upfront fees at the start.
In my latest meeting with the deputy branch manager, she said that I could draw down the fees as part of the stage payments which contradicted what I had been told previously, but I also pointed out that at least €5,500 of this needed to be paid to the council and on stamp duty before I ever broke ground. She then started talking about bridging loans which I thought was ridiculous as the money is there it’s just that they are trying to force me to use it for the wrong thing. They are also not factoring that I’ve already paid €2K of fees and therefore no longer have €48K in savings.
I’ve lost all confidence in my branch representatives and I suspect a lot of these issues are arising from the fact that they didn’t explain my financial position to the home loans dept correctly to begin with. I am now wondering if I could deal directly with the home loans department to make them see sense, though I don’t want to make trouble because at the end of the day I just want this mortgage finalised so that I can start building. I’ve also considered applying to other banks but I don’t have a consistent savings for the past 6 months which apparently all banks now want to see as they are stress testing applicants against a 6.5% interest rate.

Any advice or feedback on similar experiences would be appreciated.

AIB will always look for you to use your funds towards the site purchase because the last thing they want to be left with to sell in the case of non-payment of the mortgage is a field! By getting you to put your contribution in at this stage it protects their security and makes it a lot easier to sell the land/unfinished property to recoup the amount they have lent to date. You can factor in the additional €9.5k at any stage during the build. You just need to sit down with your architect and work out a feasible schedule of stage drawdowns. The bank release each stage payment based solely on the Architects certs so work closely with them and you should have no issues. At the end of the day the bank are giving you the amount of money you want & need so it should be just a matter or working out when the various elements are paid for.

butsy1981

Thanks for the feedback. Thankfully they've agreed to contribute more to the land to allow me to pay the fees from my savings so hopefully I can finally get started.