Land Mortgage?

racheyg

My partner and I are in the process of selling our house (ha ha, but had second viewing). We are selling to release the equity, to pay off HUGE debt that was built up following my divorce.

If we do sell, we are likely to have about £40,000 left once we clear the debts. The problem is, we have quite a good amount of money coming in, but it's not simply salaries, so the normal multiples wouldn't be fantastic. Therefore, we are thinking that we could 'build our own' by purchasing a plot of land with planning permission, or do a renovation.

Bear with me!

Our income is:

Myself c£25,000 pa (fixed normal salary)
OH £40,000pa (fixed normal salary)
Child maintenance £12,000 pa from my ex (4 years of bank account records to prove)

Then we have two businesses which are just taking off. One of them is doing really well and is just starting to bring in on average £2000 per month (which is presently just being swallowed by reducing debt), but it is never fixed, the other is breaking even.

By renting for a while, and thus having no debt anymore, we could probably save £4000 per month too, so buying cheaply and building seems like a good idea.

Can anyone tell me how Land Mortgages work and whether they think this is a good idea? Any pitfalls?

Thank you.

If there are loads of pitfalls, any advice on what we should do?

Met_Bobby

Visit the Norwich and Peterborough Building Society website. It had a good section on this last year and it may still be relevant.

racheyg

Thank you - I've had a look at their website and it's very useful.

Conrad

rachel

As you may have read, the funds are released in installments up to a certain ltv upon works being certified.

Funds available for self build are somewhat limited, so I would suggest you get everything set up well in advance.

Lenders will not allow self employed income unless it's been established at least 6 months.

Bridging finance can fill short term funding gaps, but be well aware the lender must have a preconfirmed exit route, which for example may be a fully documented account of which lender will remortgage you once the bridging ends.

Funnily enough another MSE user asked me for advice on this some time ago and he has just sucesfully completed the build last week and all is done, phew!

For that case a bridging company was use (Hampshire Trust) until the build was complete and then we remortgaged. Be aware the maximum ltv on bridging is about 70% at best.
Better to avoid bridging if possible.

Norwich and Peterborough are an old fashioned highly cautious building society, so if you try tem, be prepared for an eventful ride. No stone will remain unturned with such a lender and above all they will want proven ongoing financial capability to be demonstrable based on documents to evidence such.

Note you will need to insure the building site to include materials.
A suitable Architect is usualy required to supervise the build and a foundation 15 or NHBC certificate is needed for funds to be released in full.

All the best.

dimbo61

If you do sell your home then look for a rental property and save like mad for the next 12/24 months while you look for a suitable site.
Yorkshire Building Society are also lenders for self build.
With the market as it is land prices are low but lenders are being very careful about who they lend to.
Keep the plan simple ( forget the grand design too much overbudget )
Some great self build kits and companies ready to build you a home within the budget you have agreed.
Make sure the new buisnesses make money and keep books/accounts.
GOOD LUCK

boyse7en

I can understand it if you have a 'Grand Design' that you would like to see created, but if you are both working fill-time and starting up 2 separate businesses, are you sure you will have the time to put into the project? A large building project can easily become a time (and money) swallower of the highest order.

With a 40k deposit and 65k joint income, you should be able to get a normal mortgage for a pretty decent house purchase anyway.