HELP, first mortgage and building a new house

Jo4

We are going to build a new house behind our existing house and when the new one goes up the old one will come down. Considering there will be approximately £3,000 left on the existing mortgage how do you work out what deposit is required for a new build?

What happens about the other mortgage, does it have to be paid off or do they add it to new mortgage?

How would you go about getting a mortgage for the new build, do they release the money to the contractor/builders as they do the work or how does it all work as I never had a mortgage before and know absolutely nothing about them?

How do mortgage lenders work out how much they will give you when it is a new build?

How long do you normally need to be working before you can get a mortgage?

Is it easier to get a mortgage if you are employed or self employed?

Is it possible to get a mortgage when one of the applicants is in receipt of benefits? If so, is it better to apply in one name or both names?

Lots of questions, I hope someone can give answers!

itsakidsworld

I could not comment on what you can or cannot obtain regarding a mortgage as that is not my field of work.

However, we obtained finance from a bank when we built our house and it worked on these lines;-

We gave the bank a basic costing of the whole project and they told us that they would lend us upto 90% of the final valuation for a mortgage. They told us that they would set up a bank account for the build and allow a certain amount of funds into the account to be used to pay trades/ suppliers.

This did include land purchase. As construction commenced, we had an architect who would arrive on site at intervals of maybe one month and give a valuation of work completed. The bank would then give us a % of this, which i think was around 80%( it may have been even lower) and we paid the bills.

Then at final valuation the bank gave us 90% mortgage to clear the account of the build and clear all debts.

It is very important with a new build to retain all invoices for materials as you claim the VAT back. It is a difficult job to gage correct if you do not keep proper records. The VAT on our build allowed us to make all final payments without going over budget but it was tight and very stressfull.

But good luck with your dream and make sure it does not turn into a nightmare!!!

Jo4

itsakidsworld wrote:

This did include land purchase.

What would happen when we already own the land, would this be looked at as a deposit or do we still have to come up with a deposit?

itsakidsworld

Its very difficult to say because in our situation we bought the land.

However, if the land has not got any planning permission yet them it has no real value to the bank. If it has got "outline planning" or "full planning" permission to build ( which comes from the local council) then you are in a very good position to approach the banks.

You have to remember that the Loan To Value (LTV) on the house when complete includes the freehold land the house sits on.

Do you have any planning permission yet and any architects drawings for the build?

MortgageMamma

Hi there

You really need specialist advice on this with an advisor who has experience with self build mortgages. I know you will need a qualified architect to design the house and oversee all the work, I know the money can be released in stages for each bit of the work done, so ts important to stick to budget. I'm not sure which lenders do these as its not really my field, but if you want I will ask around the other advisors I know to see if anyone is particularly experienced in this field?

Jo4

itsakidsworld wrote:

Do you have any planning permission yet and any architects drawings for the build?

No we do not have planning permission yet. The architect is drawing the plans since Christmas and now it is just a matter of waiting on them to come through to us for hopefully the last time. It will be full planning permission.

Jo4

MortgageMamma wrote:

I'm not sure which lenders do these as its not really my field, but if you want I will ask around the other advisors I know to see if anyone is particularly experienced in this field?

If you could PLEASE find out for me that would be great!

Barney088

I am a professional mortgage advisor but took professional advice on this type of thing, Build Store was the company I used, as a previous comment stated, it is a specialist area. I ended up with Skipton but many of the larger names can help.

The fact you donlt have planning permission will probably cause an issue, we needed it before we were allowed to start. Things may have changed as that was a few years ago. Good luck, in my experience build store were great and I am very happy with the result, I now live in a house I couldn;t afford to buy.

Jo4

Barney088 wrote:

The fact you donlt have planning permission will probably cause an issue, we needed it before we were allowed to start.

We will not be looking for the mortgage until we have full planning permission but I wanted the questions answered now so I could get an idea of what lies ahead.

itsakidsworld

If you use a bank why not call them and make an appointment to see the manager. They are all very helpful.

We used HSBC and they were fantastic but to be fair, most of the banks will be around the same so you could approach a couple of them.

Ask the architect if he has drawn plans for other people in the same situation and ask for their name and number. Then why not give them a call and have a friendly chat or get the architect to ask them to call you if he cannot release their names.

The more information you receive the better prepared you will be.

Jo4

THANKS for the advice, I want to have the plans approved before I go near any banks. I haven't a clue what mortgage I will be looking for and mortgages seem to be one thing that you can save your self loads on if you take the right one out.