Unusual Mortgage situation

Happyhouse22 · 06-12-2020 8:03am #1

I have planning permission for a house on a site in an urban area , which I own, currently valued at €350,000.

I have €300,000 available to build a house, however after contacting a number of builders in the area it seems the house will cost €540,000 to €570,000 to build to a high standard including finishes.

Therefore I would like to get a mortgage for the remaining ~€250,000.

The issue is that my salary is only €40,000. This means I can only borrow €140,000 as an individual with current rules, are any exceptions made considering the low loan to value ratio in the case?

Tefral · 06-12-2020 8:20am

Happyhouse22 wrote: »

I have planning permission for a house on a site in an urban area , which I own, currently valued at €350,000.

I have €300,000 available to build a house, however after contacting a number of builders in the area it seems the house will cost €540,000 to €570,000 to build to a high standard including finishes.

Therefore I would like to get a mortgage for the remaining ~€250,000.

The issue is that my salary is only €40,000. This means I can only borrow €140,000 as an individual with current rules, are any exceptions made considering the low loan to value ratio in the case?

Is the 300k in cash in your account?

Black_Knight · 06-12-2020 8:28am

Over 6 times your salary, can't imagine getting that exception.

I'm going to assume, based on your salary, you inherited the land and at least a large portion of the 300k cash you have. The rules are there to keep people within their means, and it sounds like you're trying to live beyond your means.

[Deleted User] · 06-12-2020 8:29am

Happyhouse22 wrote: »

I have planning permission for a house on a site in an urban area , which I own, currently valued at €350,000.

I have €300,000 available to build a house, however after contacting a number of builders in the area it seems the house will cost €540,000 to €570,000 to build to a high standard including finishes.

Therefore I would like to get a mortgage for the remaining ~€250,000.

The issue is that my salary is only €40,000. This means I can only borrow €140,000 as an individual with current rules, are any exceptions made considering the low loan to value ratio in the case?

Why do you think you can afford a €250k mortgage on a €40k salary?

The loan to value only comes in to play if you default. No bank wants to go down that road.

Addle · 06-12-2020 8:30am

Are you building the house to live it in or sell it?

Calculator123 · 06-12-2020 8:35am

It's sounds like you've been afforded an incredible opportunity to live debt free, either through inheritance or some other mechanism.

The dream for most people is to have no mortgage.

Sell the site, add some of you savings to the number and you can well afford to buy a house anywhere in the country -spectacular house outside of urban areas.

Any debt or loan will be a noose around your neck on a salary of 40k.

Cyrus · 06-12-2020 8:39am

Try a broker but it will be difficult or nigh on impossible, the irony being that mortgage would only be 950 a month over 30 years if you fix at a low rate which I’m guessing you can manage.

Happyhouse22 · 06-12-2020 8:41am

Thanks for the replies.

Yes the land and money were inherited.

I understand the rules are there to keep people living within their means, to be honest it looks like the monthly repayments on a 250,000 mortgage would be about the same as I am currently paying in rent in Dublin. But guess that says more about crazy rent prices in Dublin than the affordability of the mortgage.

Plan is to live in the house, possibly using the rent a room scheme to help pay the mortgage.

I am also a director and shareholder in a reasonably successful family business, which I don’t currently take a salary from. Would this be taken into account in any way? What if I was to pay myself a salary from this to top up the salary from my 9-5 job?

[Deleted User] · 06-12-2020 8:45am

Happyhouse22 wrote: »

I am also a director and shareholder in a reasonably successful family business, which I don’t currently take a salary from. Would this be taken into account in any way? What if I was to pay myself a salary from this to top up the salary from my 9-5 job?

Yes, that would work. You might need to be paid for 6 months or so, but you'll get there. Good luck.

Happyhouse22 · 06-12-2020 8:47am

Calculator123 wrote: »

It's sounds like you've been afforded an incredible opportunity to live debt free, either through inheritance or some other mechanism.

The dream for most people is to have no mortgage.

Sell the site, add some of you savings to the number and you can well afford to buy a house anywhere in the country -spectacular house outside of urban areas.

Any debt or loan will be a noose around your neck on a salary of 40k.

This is great advice and I would follow in normal circumstances

However selling the site isn’t an option, it’s an amazing location in an urban area which has been in the family for generations and which I inherited with the express intention of building on and living in. Basically I inherited more than siblings due to a desire to keep the land in the family.

I realize I am super lucky and it’s very much a first world problem

Addle · 06-12-2020 8:50am

See an accountant OP. Use the company in your favour.
Best of luck.

Black_Knight · 06-12-2020 9:18am

Check out the possibility of taking a salary from your director role, would need to be 32k to make enough in total to qualify for a 250k mortgage. Maybe more, since a single earner of 72k will pay more tax than a dual earning couple.

The repayments might seem ok, but add 2% to your interest rate you're working from. Banks will stress test you like this to ensure you can meet the repayments should interest rates rise. Shouldn't be an issue with your directors salary included, but on 40k only it's probably about half your take home pay.

You could always reduce the cost of the house. Do you need a 550k to build home right now? Could you build something more suiting with extending in the future as needs be factored in.

Happyhouse22 · 06-12-2020 9:35am

Thanks, for all the advice.

Will definitely talk to the accountant, first plan is definitely borrow the money from the company but it seems there are strict rules around this so I probably wouldn’t be able to get enough.

Also actively looking into reducing building costs, there are some things we can do but basic building costs in Dublin are just crazy so don’t see it coming down by more than 40 or 50k.

Will ideally I would love to build the house independently a joint mortgage with my partner could also be an option

copacetic · 06-12-2020 9:45am

Your best bet is to get a good architect and give them the budget but explain you want future options built in. Then they can allow for say a third floor that is now an attic but easily converted. Prob save 30-40k, build bigger foundations allowing for side or rear extension easily, but not do either, saving up to 100k etc. even more if no extra en-suites and bathrooms. Smaller finished footprint is only really way to save if building in Dublin.

I.e bring the costs down to 400k or so but keep standards up. You will also find they can better control costs and find value than you can. It might save a bit on planning too with a good design to start from.

JCJCJC · 06-12-2020 9:49am

Happyhouse22 wrote: »

Thanks for the replies.

Yes the land and money were inherited.

I understand the rules are there to keep people living within their means, to be honest it looks like the monthly repayments on a 250,000 mortgage would be about the same as I am currently paying in rent in Dublin. But guess that says more about crazy rent prices in Dublin than the affordability of the mortgage.

Plan is to live in the house, possibly using the rent a room scheme to help pay the mortgage.

I am also a director and shareholder in a reasonably successful family business, which I don’t currently take a salary from. Would this be taken into account in any way? What if I was to pay myself a salary from this to top up the salary from my 9-5 job?

Don’t even think about selling the site without professional advice on capital gains tax. It’s a bastard of a tax that might catch you unawares.

Happyhouse22 · 06-12-2020 9:51am

copacetic wrote: »

Your best bet is to get a good architect and give them the budget but explain you want future options built in. Then they can allow for say a third floor that is now an attic but easily converted. Prob save 30-40k, build bigger foundations allowing for side or rear extension easily, but not do either, saving up to 100k etc. even more if no extra en-suites and bathrooms. Smaller finished footprint is only really way to save if building in Dublin.

I.e bring the costs down to 400k or so but keep standards up. You will also find they can better control costs and find value than you can. It might save a bit on planning too with a good design to start from.

Thanks, solid advice but a lot of time and money has already gone into obtaining planning permission for the house. I feel any money saved in building costs would probably be spent on architect and planning fees again. We have also spent money on things like ecological impact reports which may need to be completed again for a new design

Tefral · 06-12-2020 10:14am

wow, your far down the garden path already. I guess you have to keep going to some extent as planning permission has a time limit.

I'm a QS and I can say, what you are trying to achieve is difficult.

I had to answer alot of questions building my own house around how I could build the size I had at the cost I was telling them as it was below their own cost range.

A bank is also going to want to see the house finished out before giving you the final drawdown too so its not like you can start and then get it to a stage and live in it.

Theres good advice here on trying to get your salary up even for the the next 6 months.

Could you borrow the money from your siblings to finish the house, then get a mortgage on that finished house to pay them back?

Theres a good QS called <SNIP> in Dublin, that might be worth googling and chatting to see what you can do with your current 300k.

copacetic · 06-12-2020 10:27am

Happyhouse22 wrote: »

Thanks, solid advice but a lot of time and money has already gone into obtaining planning permission for the house. I feel any money saved in building costs would probably be spent on architect and planning fees again. We have also spent money on things like ecological impact reports which may need to be completed again for a new design

Ah ok, hadn’t realised you had gone that far, as above you have good family options it sounds like, either a salary or directors loan is probably your best bet.

CountNjord · 06-12-2020 10:32am

300k Could relocate you to the West of Ireland, pay for a degree, the sky's the limit.

Putting that kind of debt on your shoulders from my past observation of people similar to yourself is crippling.

I don't know you from Adam,so I'm probably posting how I'd do with that kind of money, would the land and all your planning permission and ecological report's add add value to your portfolio, sell the land and keep the money would be my Idea scenario...

Anyhow good luck with it and don't end up loosing the whole lot or living in perpetual debt to fulfill a dream...

Tefral · 06-12-2020 10:34am

CountNjord wrote: »

300k Could relocate you to the West of Ireland, pay for a degree, the sky's the limit.

Putting that kind of debt on your shoulders from my past observation of people similar to yourself is crippling.

I don't know you from Adam,so I'm probably posting how I'd do with that kind of money, would the land and all your planning permission and ecological report's add add value to your portfolio, sell the land and keep the money would be my Idea scenario...

Anyhow good luck with it and don't end up loosing the whole lot or living in perpetual debt to fulfill a dream...

He would prob fall out with his family over it if he did.... no healthy bank acc is worth that.

a mortgage worth 250k isnt that bad though?

the-island-man · 06-12-2020 10:35am

I'm not so sure the advice about the 6 months is accurate with relation you paying yourself from your family business. I was a self employed contractor (director of a company) when my wife and I went for a mortgage. I had to show 2 years of payslips. You may need to do the same for the portion of income coming from the family business if you go down the same route.

JustAThought · 06-12-2020 11:01am

I’m struggling to see how all your lical builders have a vision that spends a quarter a million euro on interiors and finishes?? This is aside from 300k to build the house - excluding the cost of
the land. It sounds like you are being taken for a total ride.

I had an attic space that needed some basic work and the quotes I got were wild - from 3k to 15k for the same costed job - many builders just looked at the house and area and gave a price that they thought suited the area and /or maxed out the profit for them - or simply said take it or leave it - I shopped around and left them.

Have you considered getting a surveyor to cost it?

From fitting out a 2200 + sq ft 3 storey house including walls, wood floors, furniture, carpeting, all white goods, beds, tiling for bathrooms etc it would have come to less than 25k. Where are your builders going with a quarter a million plus?

Also - the most expensive part of the build is the land - so 300k+ for a build sounds extortinate.

Maybe you need to get a surveyor in and then get quotes out of county based on his/her lead.

It really sounds like you are just being exploited.

Cyrus · 06-12-2020 11:03am

JustAThought wrote: »

From fitting out a 2200 + sq ft 3 storey house including walls, wood floors, furniture, carpeting, all white goods, beds, tiling for bathrooms etc it would have come to less than 25k. Where are your builders going with a quarter a million plus?

Also - the most expensive part of the build is the land - so 300k+ for a build sounds extortinate.

Maybe you need to get a surveyor in and then get quotes out of county based on his/her lead.

It really sounds like you are just being exploited.

I didn’t see where the op said it was 250k for finishes ? And finishing a 2200 sq foot house for 25k might be doable but it won’t be quality. A decent painter will charge more than half of that for a start.

Happyhouse22 · 06-12-2020 11:07am

Tefral wrote: »

He would prob fall out with his family over it if he did.... no healthy bank acc is worth that.

a mortgage worth 250k isnt that bad though?

That’s what I figure, selling isn’t an option and a 250k mortgage isn’t the worst option.

Looking at prices in the area to rent a room. There are a few up for over 1000 a month so that could be an option that would pay off most of the mortgage monthly. Would be tax free also as a bonus

Tha

Happyhouse22 · 06-12-2020 12:50pm

JustAThought wrote: »

I’m struggling to see how all your lical builders have a vision that spends a quarter a million euro on interiors and finishes?? This is aside from 300k to build the house - excluding the cost of
the land. It sounds like you are being taken for a total ride.

I had an attic space that needed some basic work and the quotes I got were wild - from 3k to 15k for the same costed job - many builders just looked at the house and area and gave a price that they thought suited the area and /or maxed out the profit for them - or simply said take it or leave it - I shopped around and left them.

Have you considered getting a surveyor to cost it?

From fitting out a 2200 + sq ft 3 storey house including walls, wood floors, furniture, carpeting, all white goods, beds, tiling for bathrooms etc it would have come to less than 25k. Where are your builders going with a quarter a million plus?

Also - the most expensive part of the build is the land - so 300k+ for a build sounds extortinate.

Maybe you need to get a surveyor in and then get quotes out of county based on his/her lead.

It really sounds like you are just being exploited.

Thanks, firstly the cost for finishes isn’t 250k, 550k in total including finishes.

I see what you mean by exploited, we have been told that we could save about 100k doing it with direct labour but I don’t think it would be a project we are capable of taking on.

We have had a couple of architects and a civil engineer involved in the project and while costs are a bit more than expected (none of them are Dublin based), it’s not that much more than figures I have seen quoted here and elsewhere. House is 200sqm.

Tefral wrote: »

wow, your far down the garden path already. I guess you have to keep going to some extent as planning permission has a time limit.

I'm a QS and I can say, what you are trying to achieve is difficult.

I had to answer alot of questions building my own house around how I could build the size I had at the cost I was telling them as it was below their own cost range.

A bank is also going to want to see the house finished out before giving you the final drawdown too so its not like you can start and then get it to a stage and live in it.

Theres good advice here on trying to get your salary up even for the the next 6 months.

Could you borrow the money from your siblings to finish the house, then get a mortgage on that finished house to pay them back?

Theres a good QS called <SNIP> in Dublin, that might be worth googling and chatting to see what you can do with your current 300k.

Borrowing from a sibling would be ideal, but not sure if they would have the money available.

Ideally we would leave out the banks entirely but started this thread to explore if it was even a possibility . Looks not on my own and I think it would even be complicated combining my income and my partners.

CountNjord wrote: »

300k Could relocate you to the West of Ireland, pay for a degree, the sky's the limit.

Putting that kind of debt on your shoulders from my past observation of people similar to yourself is crippling.

I don't know you from Adam,so I'm probably posting how I'd do with that kind of money, would the land and all your planning permission and ecological report's add add value to your portfolio, sell the land and keep the money would be my Idea scenario...

Anyhow good luck with it and don't end up loosing the whole lot or living in perpetual debt to fulfill a dream...

Tefral wrote: »

He would prob fall out with his family over it if he did.... no healthy bank acc is worth that.

a mortgage worth 250k isnt that bad though?

Yep, can’t sell the land

the-island-man wrote: »

I'm not so sure the advice about the 6 months is accurate with relation you paying yourself from your family business. I was a self employed contractor (director of a company) when my wife and I went for a mortgage. I had to show 2 years of payslips. You may need to do the same for the portion of income coming from the family business if you go down the same route.

You are probably right here, this probably rules of this option.

[Deleted User] · 06-12-2020 12:54pm

The West of Ireland versus Dublin City Centre where he works and his partner lives is no comparison.

I suggest you go to the bank that works with the family business. While mortgages may no longer be sanctioned locally it won't hurt to get a referral from your local bank manager.

With your circumstances I think 6 months income from your director role would be enough.

Here's the controversial bit. You could start the process now with your €300k and you'd not need the €250k until you'd qualify time wise, which would mean no delay.

Some will strongly disagree with that though.

Bass Reeves · 06-12-2020 12:55pm

If the house is costing 540k to build it must be substantial dwelling even taking to final finish. Did you not get prices for it before looking for planning

[Deleted User] · 06-12-2020 1:03pm

Happyhouse22 wrote: »

You are probably right here, this probably rules of this option.

KBC, for example, look for 6 months salary proof.

https://www.kbc.ie/our-products/mortgages/first-time-buyers/getting-your-finances-ready-(1)/an-employees-guide-to-securing-your-first-mortgage

Your circumstances are different. You've been an unpaid director for longer. Just make sure you get confirmation you've passed probation. :rolleyes:

antoinolachtnai · 06-12-2020 1:21pm

Speaking to an accountant and working with your family’s bank is the way to go here if you want to do this. I think you will be able to do it if you have the support of your family.

The advice to find a QS is good too. The prices you are talking about to build this may well be optimistic. There is just no way to know what construction costs will be like even a few months into the future at the best of times and these are definitely not the best of times. What I am really saying here is that you might need to be ready to significantly exceed the current budget.

What you are really doing here is leveraging the wealth of your family to build an extensive home for you and your partner. There is nothing wrong with that at all.

However, you are tying up all your own personal wealth (inheritance plus savings from future income) in a house that may not suit you in a few years and which you cannot sell on the open market without upsetting your family. Even if family preferences were not a consideration, you may find that the property might be difficult to sell in the future for its full value (there just aren’t that many people in the market for a €1.2m+ house in Ireland). You need to consider for yourself whether this suits you in the context of your overall situation.

Really what is happening here in the background is that wealth is being passed down from one generation to another. There are all sorts of considerations for your family in doing this in an effective way. Obviously the site you plan to build on is part of a bigger picture and you need to consider it in the context of that bigger picture.

Lexio7 · 06-12-2020 1:23pm

The short answer is no. On a €40k salary no bank will issue a mortgage of €250k, no matter how much equity you have.

Even if you managed to secure the €250k have you thought about how you would manage if you went 10-15% over budget due to unforeseen circumstances?

You are appear to be a blessed position and this may be one of the most important financial decisions you make. The last thing you want to have happen is find yourself drowning your n debt which can be avoided based on your current circumstances.

JJJackal · 06-12-2020 1:43pm

How much would it cost to build the house with just the 4 walls and none of the finishing?

One option would be the build the basic structure in a way that you could live in it - one complete bathroom, basic bedroom, basic kitchen and work through the rest over time.

All rooms dont need painting, floors, curtains, wardrobes etc immediately

Unusual Mortgage situation

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