Self Build Mortgage/Bridging Loan

KaesarSosei

Hi,

First time post after several weeks of lurking, but i haven't seen much on this subject.

Myself and my wife are in the process of buying a plot to build a house on. We currently live in a house which has a 65k mortgage left but which we can remortgage for £120k (80% LTV). We also have 50k savings and no other major loans, and a very good credit rating.

The plot costs 105k
Build costs are around 150k

There seems to be many obtacles and options for us but I can't decide which way to proceed. Until now our plan was to remortgage the current house and use that plus savings to buy the plot. That would leave us needing "only" the build costs of £150k which we can get from another mortgage quite easily apparently (we have agreement in principle) , but the problem is it will only be released in stages in arrears and so we would need bridging finance.

Will any lenders be happy to give us a bridging loan to get the build started ahead of the mortgage being released? I'm awaiting a quote from the timberframe company to get exact figures, and also to confirm their payment requirements, but as a minimum I expect the loan to need to be £30k even if its for only a month or two.

Or is there another way to go about this so as not to require bridging finance?

Many thanks for getting this far through my wall of text!

Conrad

Well there are many options which would take pages of notes to go into, but yes in priciple there are bridging lenders. Banks are the obvious first thought but the underwriting is tough and problematice. If you want it quick and easy then I'd say use a specialist bridger like D&C but the rates will be about 15% and several thousand in fees.

dimbo61

Or you could sell your existing home and live in a caravan onsite for 6/9 months and oversee the new build
You would have more equity to buy the land and start the build

KaesarSosei

Selling the current house would indeed give us an extra 20k or so which might be enough, however the problem is that planning permission expires in March so we need the money asap to get building, and don't think we can get the proceeds from the sale in time. The remortgage is complete and just waiting me to send forms back in the post.

Bridging loans sound problematic, I'm thinking of trying to get as many 0% credit cards as possible and going that route. There should be no issue with not getting them paid back in time since we will get a mortgage for them.

However I'm wondering about the timing of the applications. Ideally I would like to know that I can obtain 30k in credit on cards, but at the same time I don't want to apply before signing the self build mortgage. Am I being overly pessimistic at wondering if we would get refused the credit cards after accepting the mortgage, or worse still that somehow the mortgage would get cancelled later because of credit cards I applied for after agreeing it?

Thanks

dimbo61

speak to the planning people first about extension on the planning consent!
You may need to start the work but that might only involve digging out the footings / foundations ?

dimbo61

Taking out several credit cards to pay for the start of the works may stop you from getting a mortgage ?
Lots of people being turned down for a mortgage unless all CC debt cleared first

KaesarSosei

Unfortunately the March planning deadline is final.

Thanks for the tip about the credit cards, it looks like that is not an option.

Does anyone have any other advice about bridging loans? I'm pulling my final strands of hair out over this! What does D&C, mentioned above, stand for?

danielf

If I were you I would avoid bridging loans like the plague. The interest rates are high and the terms and conditions can be onerous. The costs of legal representation can be high and you are not always guaranteed a speady turn around. If you take that route you will need a good lawyer to seriously check the agreement and what it means if things go wrong. Have you looked at the website buildstore.co.uk. Check this website.There are lenders that will pay for works in advance which of course would help your cashflow
DanielF

sarahmalter79

I understand your concerns with Bridging Loans, I had to use one for the property I am in now and I can't recommend Masthaven Finance enough!

I had a gap between buying a new property and selling my old house and they were really helpful and friendly! Best of all I had my answer really quickly so it put my mind at ease!
Sarah