Self Build Mortgage - any chance?

KarlyF

I am thinking of applying for a self build mortgage but before I apply for planning etc. I would like some advice as to whether I am being unrealistic in expecting to get approved for a mortgage? My details would be as follows:

• Married but husband is self employed with very little earnings the past 3 years and currently has a loan ending this year
• I am in a permanent role for past 5 years and have just got a pay rise to bring my salary up to approx. 36k if earning for a year (p60 for 13 wont reflect this as was on maternity leave and only just got pay rise)
• 1 Dependant (no childcare costs as family minding)
• No current loans/debts etc.
• 40k savings
• Site being given by parents
• Cost of build approx. 170k (can build for less as husband can do a lot of work but doubt bank would accept this?)

Am I better applying as a single applicant?
Is there any chance applying at all?

Any and all advice would be greatly appreciated!

jathclare

I'm not a broker or an expert by any means but I have applied unsuccessfully in the last 12 months for a self build (2nd) mortgage, here are some pointers that I picked up:

Savings history, regardless of savings is really important, can you show where your funds came from?

LTV can make a big difference - What size house are you planning, whereabouts etc?

If your total budget is €210k, banks don't accept price per sq/ft as being realistic if under €85-€90

If your a first time buyer, guidance of 4.5 times salary is probably the upper range.

There are certainly builds for €210K taking place though.

I'm going back to apply in a few weeks via a broker, if I learn anything more I will share of course. Good luck.

Trish56

KarlyF wrote: »

I am thinking of applying for a self build mortgage but before I apply for planning etc. I would like some advice as to whether I am being unrealistic in expecting to get approved for a mortgage? My details would be as follows:

• Married but husband is self employed with very little earnings the past 3 years and currently has a loan ending this year
• I am in a permanent role for past 5 years and have just got a pay rise to bring my salary up to approx. 36k if earning for a year (p60 for 13 wont reflect this as was on maternity leave and only just got pay rise)
• 1 Dependant (no childcare costs as family minding)
• No current loans/debts etc.
• 40k savings
• Site being given by parents
• Cost of build approx. 170k (can build for less as husband can do a lot of work but doubt bank would accept this?)

Am I better applying as a single applicant?
Is there any chance applying at all?

Any and all advice would be greatly appreciated!

OP Would need more information to be able to give you an indication of how much you would qualify for.

• What is value of gifted site?
• What ages are you?
• How much do you save monthly?
• What is sq. footage of proposed property
• Are ye both first time buyers?
• Do you have planning Permission?
• Do you pay rent and if yes how much monthly and if paid by bank transfer or standing order.
• Do you have a good credit rating?
• Confirmation of husbands income submitted to Revenue over past 2/3 years. Should have balancing statement's or Accountant will have copy.
• Monthly repayment on husband's business loan ?
• Is his taxes up to date.

KarlyF

Trish56 wrote: »

OP Would need more information to be able to give you an indication of how much you would qualify for.

• What is value of gifted site?
• What ages are you?
• How much do you save monthly?
• What is sq. footage of proposed property
• Are ye both first time buyers?
• Do you have planning Permission?
• Do you pay rent and if yes how much monthly and if paid by bank transfer or standing order.
• Do you have a good credit rating?
• Confirmation of husbands income submitted to Revenue over past 2/3 years. Should have balancing statement's or Accountant will have copy.
• Monthly repayment on husband's business loan ?
• Is his taxes up to date.

Thanks Trish56
Site would be 40k approx, I am 32 hubby 37, I save €270 monthly at the moment, rent is €450 by bank transfer, both first time buyers, approx 2500sqft, my credit rating should be perfect, hubby had an issue with mobile phone co but paid his balance after a couple of months, hasn't balancing statement to hand but afaik no tax needed to be paid as income was so low. Every return up to date, Loan is €340 a month ending in dec.
I currently cover all household and utility bills from my current account.

joe316

KarlyF wrote: »

Thanks Trish56
Site would be 40k approx, I am 32 hubby 37, I save €270 monthly at the moment, rent is €450 by bank transfer, both first time buyers, approx 2500sqft, my credit rating should be perfect, hubby had an issue with mobile phone co but paid his balance after a couple of months, hasn't balancing statement to hand but afaik no tax needed to be paid as income was so low. Every return up to date, Loan is €340 a month ending in dec.
I currently cover all household and utility bills from my current account.

Hey,

Firstly your estimates are quite low, €84 a sq foot probably wouldn't be accepted by a bank as even if they are realistic it leaves no room for if/when things go wrong during the build (which they will). My friend is a QS who has his own building company and he is building a friends house and even putting everything through his company for VAT and tax purposes (not saying this is right) it is coming out at about 90-100 a square foot.

The cost of the mortgage of 170k is approx 850 a month (@4.5%) stress test to 6.5% it is 1080 over 30 years (I dont think you would get it for any longer). If you add up your savings, rent and possibly they may take in your loan (you should pay this off now!) it comes to 1060. You are extremely boarderline as to been within the tolerance levels.

Putting your income in to a tax calc (as a single person) since you haven't stated your husband's income you are coming out with approx 2350 a month after tax (not including any other deductions, etc..). The banks (using AIB) are applying a rule that a couple needs 2050 a month for expenses plus 250 for each child. What is left over is what you can pay for a mortgage so unless your husband's income is enough to cover the mortgage on his income I dont think you qualify unfortunately even though at the moment you have the same outgoings as a mortgage.

Sorry!

ssbob

KarlyF wrote: »

Thanks Trish56
Site would be 40k approx, I am 32 hubby 37, I save €270 monthly at the moment, rent is €450 by bank transfer, both first time buyers, approx 2500sqft, my credit rating should be perfect, hubby had an issue with mobile phone co but paid his balance after a couple of months, hasn't balancing statement to hand but afaik no tax needed to be paid as income was so low. Every return up to date, Loan is €340 a month ending in dec.
I currently cover all household and utility bills from my current account.

Hi Karly,

Even if your hubby is not liable for income tax, he will still be liable to pay approx €400 a year in PRSI, this needs to be up to date before the bank will even look at you. He also needs to have at least 2 years Self Employed behind him but from what you say he does have that. 40k is great savings but why are you not paying down the loan with this(be much cheaper in the long run).

What I found very helpful recently was going in and talking to the bank, they will let you know where you are at and where you need to get to.

ssbob

KarlyF

Thanks ssbob and joe316 for the advice, everything you say helps.
My husband is due to meet his accountant next week so will get his accounts for the past 3 years and see what we come up with, I am sure the PRSI has been looked after but will double check that one. The lump sum is mine but may take your advice and clear the loan in the coming weeks altogether...
Our architect had advised we would be able to build for approx.€70 per sqft...we are in the midlands, this sounds to be way off by what I have heard on here (try telling my husband that though...)
We both bank with the same bank so will set up a meeting, but wont hold out too much hope...:(
Thanks for the advice as I didn't want to build up my hopes too much before we go in.

ssbob

KarlyF wrote: »

The lump sum is mine but may take your advice and clear the loan in the coming weeks altogether....

What's mine is my own comes to mind here:D

KarlyF wrote: »

We both bank with the same bank so will set up a meeting, but wont hold out too much hope...:(
Thanks for the advice as I didn't want to build up my hopes too much before we go in.

The meeting will be good for you as it will set you on the right track, I don't think you are too far away from where you need to be.

Oh also don't worry about the €36k not showing on your payslips for 2013 as you can get a salary cert from work which states the amount you are on.

Trish56

KarlyF wrote: »

Thanks Trish56
Site would be 40k approx, I am 32 hubby 37, I save €270 monthly at the moment, rent is €450 by bank transfer, both first time buyers, approx 2500sqft, my credit rating should be perfect, hubby had an issue with mobile phone co but paid his balance after a couple of months, hasn't balancing statement to hand but afaik no tax needed to be paid as income was so low. Every return up to date, Loan is €340 a month ending in dec.
I currently cover all household and utility bills from my current account.

Hi Karly,
Lender's will base cost of construction at circa €85/€90 per sq. ft. so at 2500 sq. ft. = €212,500 less 40k savings = €172,500 mortgage required however you will have to qualify for 10% more to cover cost overruns = €189,750. If you were to apply in joint names with only your sole income of 36k you would not qualify for 189k. Your husband needs to show an income of at least 10k. Lender will look for 2/3 years accounts and P21 (balancing statements) from Revenue as evidence.

Also stressed tested repayments would be €1020 per month so you need to show repayment capacity of this amount through savings/rent for 6 months. Between rent and savings you are paying €720 so need to increase savings by €300 per month. Did not nclude €340 business loan as I presume it is reflected in accounts.
You might consider based on your current income to reduce the sq. footage of the house to 2000 sq.ft. which would make it much more affordable.

I totally agree with you that you can build for €70 per sq. ft. as I have numerous customers that have built for this price however the banks will not accept this price. Is your husband in the building industry?

Xidu

Can't answer the loan question, but I can say our house cost us €60 per sqft. Including underfloor heating, triple glaze windows, semiwood flooring. We did a lot ourselves, hired labor for digging, blocks, electricity, plumbing, plastering, underfloor heating pipes put on, painting, putting tiles. We did foundation n roof by ourselves.

KarlyF

Thanks for all the info, has been a great help.:D
Yes we could do a lot of work ourselves as my husband is in construction but would need additional labour as he works by himself at the moment. But id imagine we could save a lot as we go along.
Good to know it can definitely be done less than what lenders go by, that had me worried!!:eek:

Wildquill

If I may set the cat amongst the pigeons here... *coughs*

Having taught courses on hand-crafted natural building to hundreds of mostly A-income professionals and business people over the past 20 years, one of the most shaking pieces of advice I have consistently offered is to do it without a mortgage, or at least with the smallest one possible.

There is a direct trade-off in compromising the completion time to avoid both the stringent expectations set down by the mortgage and the huge interest you will pay.
If you/he take on the building process as a journey, rather than a destination, you will find the process exhilarating and fulfilling, as opposed to being a penance.
You'll be able to enjoy each stage and not feeling consistent stress that inevitably goes hand in hand with being under the gun.

Of course if pigs could fly...


Onward in the quest!

Wildquill

ssbob

Wildquill wrote: »

I have consistently offered is to do it without a mortgage, or at least with the smallest one possible.

Ideally we would all like to do that but it's not that simple! Its the way the world works unfortunately, the time in your life when you need the most money you have the least and later in life when you need the least you have the most.