Self Build started with savings and then apply for mortgage?

Maclyn

Hi,

We have just giving the go ahead to our architects to start on our brief and get going on planning permission.

We have a bit of savings behind us, as this has been on the cards for the last 12 years and with recession etc we have had to put on hold etc.

What I wanted to know was, is it possible to start our build with our savings, borrow from a credit union and when we get it to a certain stage, apply for a mortgage then?

Thanks a mill,

Maclyn

delfagio

I'm not sure if it can be done that way as banks need Certification from Engineers/Architects etc from start to finish.

So firstly the bank will penalise you if you have a loan from the credit union or other institutions as this could effect you on the amount you could borrow.

I would talk to a bank first to see what they would require and if it's possible but I'm going to say it's a no go.

Gumbo

The bank will see the credit union loan and reduce their offer accordingly. Last thing you need is to get into the build and then the money dries up. Me personally, I'd be looking for a mortgage now and using your savings as proof of deposit etc

anoble66

I would check in with your local branch mortgage adviser. I found them to be very helpful and they will tell you the best route to go depending on their lending criteria / policy. But in general the bank is going to look for proof of savings as deposit, it's unlikely they will take into account any works completed to date and they are not going to look favourably on any other loans. Most banks will only fund around 90% of each stage payment, expecting you to fund the rest, and also look for 10% contingency of the total build cost to be in place in the form of savings, if going direct labour route they also expect you to fund the engineer / architect, council contributions, water and esb.....that was my experience anyway. If it were me, keep the savings and get a mortgage.

Maclyn

Thanks a million for advise. Will look into it further, but it looks as if a mortgage would be the best route to take.

tedimc

Fully agree with previous statements - another point, and its personal opinion; but I would spend the banks money a lot sooner than my own savings. We were in a similar boat, but spent most our savings buying the property before renovating. It is now a lot harder to scrape some savings together and we have to spend our own first before the bank will release more.

Keep as much of your own money as you can - it's a lot harder to save later. Mortgage rates are cheap at the moment, probably will not be as low again for a long long time.

If I was going again - I would definitely look for more and spend less of my own.

tedimc

Fully agree with previous statements - another point, and its personal opinion; but I would spend the banks money a lot sooner than my own savings. We were in a similar boat, but spent most our savings buying the property before renovating. It is now a lot harder to scrape some savings together and we have to spend our own first before the bank will release more.

Keep as much of your own money as you can - it's a lot harder to save later. Mortgage rates are cheap at the moment, probably will not be as low again for a long long time.

If I was going again - I would definitely look for more and spend less of my own.

BarneyMc

Absolutely engage with the banks now and use the mortgage to build. I started using my savings and ran into real trouble when I went to look for a mortgage. It took a long time to sort out.

Borrowing from a credit union will be very expensive anyway whereas mortgage rates are really low at the moment.

BarneyMc

Absolutely engage with the banks now and use the mortgage to build. I started using my savings and ran into real trouble when I went to look for a mortgage. It took a long time to sort out.

Borrowing from a credit union will be very expensive anyway whereas mortgage rates are really low at the moment.

Calibos

My parents screwed up big time in 2009/10. They were renovating a Victorian that required about 200,000 of work which they applied and got agreement in principle for a Tracker Mortgage from EBS. The agreement in principle period did overlap with the start of works on the renovation but the parents used some savings to pay the first installment to the builder instead of drawing down the mortgage. ie. instead of drawing down the first payment from the mortgage in December 2009, the paid the builder out of savings. By January 2010 the builder had gutted the house and when the next payment was due in January they went to draw down the first payment from the mortgage. The bank said the agreement in principle period had expired and they were now withdrawing the tracker mortgage offer. They had the parents over a barrel with the house already gutted, they couldn't start again looking for another mortgage provider and tbh at that point in 2010 with the economy tanking, they wouldn't get a tracker from anyone else by then anyway. God knows how much that screwup has cost them in the last 6 years.

To add insult to injury, despite me trying to explain that the great recession would put downward pressure on ECB interest rates rather than upwards and vociferously advising against it, my parents fell for EBS scare tactics that now (2011) was their last chance to Fix their interest rate and the facility was being withdrawn (of course this was a lie). They fixed at 5.6% in 2011 for 5 years. That rate only ends this month for them. They are in arrears on their mortgage by pretty much what this fixed rate cost them over the last 5 years and thats just the difference between the variable rate and that 5.6% fixed over the last 5 years. Imagine what they would have saved if they'd still had the tracker.

So No. Don't use your savings!!

kyeev

It all depends on your circumstances.
How much cash savings have you?
Are we talking 20k or 100k?

How well do your bank know you?
Have you been saving regularly with them for the past 15 or 20 years?
Have you paid off a previous loan with no problems?

Do you have other land, you can use as collateral with the bank.
Do you want turn-key hi-spec finish or just a house to move into that you can finish yourself over the next few years?

For example, in my situation, I had a 15 year history of saving with the bank. So I ended up using all my savings to start the build, got a 70k loan from the bank, and scraped my way to a builders finish. Now, its 5 years later, the house is largely finished and my loan has one year to run.

Whereas, my mates still have another 20-25 years left on the their mortgages...

briaineo

Maclyn wrote: »

Hi,

We have just giving the go ahead to our architects to start on our brief and get going on planning permission.

We have a bit of savings behind us, as this has been on the cards for the last 12 years and with recession etc we have had to put on hold etc.

What I wanted to know was, is it possible to start our build with our savings, borrow from a credit union and when we get it to a certain stage, apply for a mortgage then?

Thanks a mill,

Maclyn

Can I ask to which stage you plan to get to before asking the bank for money?

I'm just wondering at exactly what stage they might consider it being built and your looking to mortgage an existing building not for self build. Eg no compliance Certs etc required from the bank.

sheff the ref

kyeev wrote: »

It all depends on your circumstances.
How much cash savings have you?
Are we talking 20k or 100k?

How well do your bank know you?
Have you been saving regularly with them for the past 15 or 20 years?
Have you paid off a previous loan with no problems?

Do you have other land, you can use as collateral with the bank.
Do you want turn-key hi-spec finish or just a house to move into that you can finish yourself over the next few years?

For example, in my situation, I had a 15 year history of saving with the bank. So I ended up using all my savings to start the build, got a 70k loan from the bank, and scraped my way to a builders finish. Now, its 5 years later, the house is largely finished and my loan has one year to run.

Whereas, my mates still have another 20-25 years left on the their mortgages...

Did you get a 70K loan or was it a 70k mortgage.

What criteria existed to get this?

sheff the ref

delfagio wrote: »

I'm not sure if it can be done that way as banks need Certification from Engineers/Architects etc from start to finish.

So firstly the bank will penalise you if you have a loan from the credit union or other institutions as this could effect you on the amount you could borrow.

I would talk to a bank first to see what they would require and if it's possible but I'm going to say it's a no go.

You can get all work certified by an engineer regardless of where you source the money to build