Self build mortgage question

Blackboot

Hi all, we are building. We will have mortgage approval in principle for an amount for the build based on deposit. The build will cost 70k more than this. My parents are selling a house which we will get proceeds from to make up the shortfall but these will not be available until well into the build. Does anyone know how we go to the bank with this re. valuations etc
I'm totally lost.

sydthebeat

Blackboot wrote: »

Hi all, we are building. We will have mortgage approval in principle for an amount for the build based on deposit. The build will cost 70k more than this. My parents are selling a house which we will get proceeds from to make up the shortfall but these will not be available until well into the build. Does anyone know how we go to the bank with this re. valuations etc
I'm totally lost.

Don't start until all funds are available?

Blackboot

Damn, should this be in a costs section?

Blackboot

If we wait, we lose the site.

sydthebeat

Blackboot wrote: »

If we wait, we lose the site.

What time length are we taking about here?

If the site falls through then any new planning application will take a minimum of 3 more months..... Why would the site vendor want to go through all that again.

Assuming you already have planning, why don't you use your current deposit to pay for the site, and then use the site as your collaterol ie the mortgage deposit

Blackboot

It's a big site and the deposit won't cover it I'm afraid.

Blackboot

We have full planning but there were huge delays and the vendor understandably wants to draw a line under it.

You're stuck.

You can't afford either the site or the build as it is.

Is there any way of drumming up some extra cash to pay for the site?
Sell a car, loan from parents, whatever.
Once you own it the next question is affording the build.
Any outstanding loan will probably reduce the amount you can borrow so you would probably need or want the cash from the sale in your bank account before starting to build.

Blackboot

No, I think we might be in trouble.

MastiffMrs

Could you look at your costs and maybe finish to a certain level, then use the 70k to finish it off at the end?

For example, don't put in fireplace, flooring, tiling, etc. Live with one finished bathroom, bedroom and kitchen, then leave the rest until the 70k is available.

Blackboot

We could definitely do that, the question is would this satisfy the bank and allow us to draw down on the site. Would they see this unfinished house as a something they could sell and recoup the mortgage should we default.

sydthebeat

Blackboot wrote: »

We could definitely do that, the question is would this satisfy the bank and allow us to draw down on the site. Would they see this unfinished house as a something they could sell and recoup the mortgage should we default.

Banks won't accept any conversation about unfinished rooms etc.

What is your "per sq ft" cost going to be, and what would it be without this extra money? Could you present some scenario that you are doing a direct labor build and that you have lots of free labour in order to cut costs down?

dubrov

Just tell the bank you are receiving a 70k gift from your parents. They will ask your parents to sign a gift letter confirming this

dellas1979

Hi OP,

Are you trying to buy a site with mortgage money?

Or are you buying the site now, and then intend to build?

I am in the middle of a build, and I cannot afford to finish the house in one go. I will go to a builders finish, and the self-build the rest. In my case, the build itself alone has come in e25k more than the mortgage. Do the banks know this? No. You cannot go to the bank and say that the mortgage wont cover the house to a finish. They will not touch you.

I employed an archi who knows my situation. And when filling in costings for the bank, he put in (for example) kitchen 3k. Stairs 1.5k. He put in as low cost for everything that he could, so I could get the mortgage.

These are just figures to get the mortgage.

You could stick to a stairs for 1.5k or indeed pump some money in and get a better quality for 3k.

The banks will consider the house "finished" when there are stairs/toilets/kitchen and statisfy planning conditions.

You also need to take into consideration the bank will hold back about 15% of your mortgage until the house is signed off as finished. This one is sort of...ironic. Because one obvs needs that money to finish off. But anyways, this is how they work. It's like expensing something I guess. You pay first. Then get your money back.

I've saved my ass off and now should have nearly enough to finish the house when the time comes. It takes 9-12 months to get the build finished, so was able to save like a crazy person (and help to buy was available to me too).

awec

dellas1979 wrote: »

Hi OP,

Are you trying to buy a site with mortgage money?

Or are you buying the site now, and then intend to build?

I am in the middle of a build, and I cannot afford to finish the house in one go. I will go to a builders finish, and the self-build the rest. In my case, the build itself alone has come in e25k more than the mortgage. Do the banks know this? No. You cannot go to the bank and say that the mortgage wont cover the house to a finish. They will not touch you.

I employed an archi who knows my situation. And when filling in costings for the bank, he put in (for example) kitchen 3k. Stairs 1.5k. He put in as low cost for everything that he could, so I could get the mortgage.

These are just figures to get the mortgage.

You could stick to a stairs for 1.5k or indeed pump some money in and get a better quality for 3k.

The banks will consider the house "finished" when there are stairs/toilets/kitchen and statisfy planning conditions.

You also need to take into consideration the bank will hold back about 15% of your mortgage until the house is signed off as finished. This one is sort of...ironic. Because one obvs needs that money to finish off. But anyways, this is how they work. It's like expensing something I guess. You pay first. Then get your money back.

I've saved my ass off and now should have nearly enough to finish the house when the time comes. It takes 9-12 months to get the build finished, so was able to save like a crazy person (and help to buy was available to me too).

Surely this is fraud?

Shaunoc

awec wrote: »

Surely this is fraud?

why
its possible to get a cheap kitchen and stairs
also possible to pay crazy money for the same. each to their own

MastiffMrs

If the work is going to cost 70k more than the bank are giving you, how have you explained this in your application? Did you say you have that money already?

Do they now do a final inspection of the house?

When we built, we got all the money from the bank and it was unfinished. But we didn't ask for money for flooring, fireplace, paint, furniture etc. We were told they wouldn't cover it in the mortgage. So that's what I mean by not finishing rooms completely. It wasn't an issue for the bank.

Calahonda52

Whats the math/LTV look like here?

I seems to me that that you don't have enough mula to buy the site so you are looking for the mortgage to part finance the site purchase, plus fund the construction, and you are 70K short.

In short you are over stretched and risk losing the lot if things go south.

IMO, raise a loan on the house the parents are selling, secured on it by the same bank that was lending to you, assuming it's not a PPR and decent LTV's, and then be liquid from a cash perspective.

dellas1979

awec wrote: »

Surely this is fraud?

Lolsss!! :pac: I think you're not understanding...

How is it fraud when the banks have the information? They were given this information. And it is technically correct. I'm telling them the minimum I need from the mortgage to put in a kitchen is 3k. The minimum I need to put in a stairs is 1.5k.

They saw kitchen = 3k, and didn't bat an eyelid. The information is not concealed/hidden.

If anything, the banks will be delighted (well, as much as banks do), as if I put in things of higher value (and I am) the house will potentially be valued more/more lucrative to them.

Now, if you were to build a big 2500 square foot house and told them a kitchen = 3k, maybe a few eye brows would be raised. But then you'd also (I assume) be applying for a bigger mortgage. So, the value of the kitchen would have to be adjusted for that.

Calahonda52

dellas1979 wrote: »

......
I employed an archi who knows my situation. And when filling in costings for the bank, he put in (for example) kitchen 3k. Stairs 1.5k. He put in as low cost for everything that he could, so I could get the mortgage.

These are just figures to get the mortgage.

.

Fraud, bravado and naivety in equal measure.

Its one thing to engage is such practices, its completely another to share it here as a proposed solution to the OP

dellas1979

Calahonda52 wrote: »

Fraud, bravado and naivety in equal measure.

Its one thing to engage is such practices, its completely another to share it here as a proposed solution to the OP

Stop calling me names. Youve done this before. And it is nothing short of bullying from your keyboard.

The banks have all the information Ive shared here.

A kitchen and stairs could be done for those amounts (for the size house am building).

All disclosed to the bank. All stages certified.

Do you think, what? I wrote the application on the back of a beer mat and every so often for a stage payment I ring the bank myself and go "Here John, transfer me 25k there".

dubrov

In fairness, declaring to the bank that the installation of a kitchen will cost x when you know it will really cost y is fraud. No chance that you would be pursued for it though

awec

Deliberately misrepresenting your finances and costs in order to get a mortgage is definitely fraud.

Fair enough you're unlikely to be pursued for it but I wouldn't be recommending it on here for others to follow.

dellas1979

I do not get how you can call this fraud - which is a very strong accusation, when the minimum is (using kitchen as an example) is 3k.

I will be spending 3k (mortgage money) on the kitchen - plus another 4k (that I have now saved).

Am I bound to put in a kitchen for 3k because that's what the banks were told/costed at the time?

Am I bound to put in windows for exactly 15k? Not a penny under/over?

What is yer point? How is it lying?

This is ridiculous.

Which one of ye have actually built a house, and stuck - exactly to the penny/pound - to the costings the bank were given?

What law/regulation has been broken that I want to put more of my own money into the build now I have it? If you want to accuse me of something so serious as fraud from yer keyboards, back it up.

I got a mortgage fair and square from a bank. The first draw down, I had to pay half the invoice myself, per agreement with the bank. I've fulfilled everything they asked me to do. And now I've saved up and can put more into the build, am being called a fraudster?

If am called fraudster or implied one more time, I will call rank here with a mod, and I will proceed to get details and pursue myself.

BryanF

Thread closed. OP’s question answered.