self build - mortgage for buying site + building?

rover25

Just wondering is this possible ie. to get a mortgage that allows you to purchase a site and for the build costs on it. When we were buying our present house a few years ago, I though people who were building were able to get a mortgage that covered the cost of site purchase and build costs. Obviously they still needed a deposit eg 10% of total cost for site and build costs together. Perhaps I'm wrong or they no longer exist. Can anyone advise. Thanks

minnieuk

You can get a self-build mortgage from a number of lenders. Buildstore have a lot of info on their website but any mortgage advisor should be able to tell you who would offer you this type of product.

rover25

How do these work when you are going to purchase the site from the seller? How do they get their money? If the site is 50 grand, does the mortgage lender pay this out first? Sorry if I sound a bit gormless!

quintwins

hi we acually went to a few banks about this and were told we could only get one for the value of the plot, as the way they looked at it what if we never acually built said house and then defaulted on our loan they could only get the value of the land back

Golden_Anemone

A quick Google came up with these results. Not all these mortgages may be available in NI but BoI and Progressive products are NI specific. There is some general information under the list of products and more detailed info on the more info tab on each product.

It is incorrect that you will only be able to borrow the cost of the plot. Mortgages for new build houses, whether bought from a developer or self builds, are paid in "stage payments" with certain percentages of the funds being released as pre-agreed parts of the build are completed. That way the lender avoids the risk of being left with an asset which is worth less than it has loaned.

Good luck.

rover25

Thanks for the replies.
So essentially the first stage released would be an amount that would cover the site purchase? Is this paid into my bank account and then I pay the seller of the site?
Would the next stage released be foundations? etc
How do you factor in a deposit into this? If we reckon the site costs 50,000 and build costs 100,000 totalling £150,000 and we have £15,000 deposit (10%), does the lender take the 10% of the build costs it is to lend (the site seller has to get all of his money requested)

Thanks for all your help

Golden_Anemone

Rover25, as in any house purchase you are going to need a solicitor to do the conveyance. The lender normally releases funds to him/her and he/she will pay money out to the seller and the builder. You will be asked to make up the shortfall at each stage and that would amount to your deposit.

As for how much a particular lender is prepared to release at each stage of the build I think that will differ from lender to lender and property to property. I think you need to discuss this with a mortgage advisor for that level of detail.

CL

I think the way it works is that you supply the mortgage lender with your building plans (I assume you are buying a site which already has planning permission?) They then put an estimated value to the finished house and will lend you a % of this value. You will then draw down this amount in stages. The mortgage company will send a surveyer to inspect the build/site before they release each stage to you.

We got a self build mortgage from the Leeds Building Society.

From "This is Money" website re: self-build mortgages:

"In common with other lenders, N&P has tightened up on its loans. Barker says: 'We used to lend up to 85% of the purchase price of the land and up to 85% of the finished value of the home, but have restricted that to a maximum 75% loan to value.'
But even at 75% LTV, self-build can still be a way on to the property ladder for borrowers who do not have huge deposits. This is because the LTV is calculated against the estimated market value of the completed home. Typically, the total cost of buying the land and completing the build might be 20 to 30% less than this final value."

rover25

Can I ask was this an arrears or advanced self build mortgage? I suspect that if they inspected each stage before they released it to you means it was an arrears mortgage. Can I ask how you get plans done on the site, if you don't own it yet (part of selfbuild mortgage to purchase said site)
Thanks

CL

It was paid in arrears. We did own the site before hand, but if the site is advertised as having Full planning permission then there are plans for a house already submitted and the seller can provide you with this. If the site only has outline planning permission I suspect the mortgage will be in 2 elements. One for the value of a site with outline planning permission and one for the build.

kBoothy

Chowley buildind society seem to be in the market for them. i stuggles with my self build for various reasons but now they in the market. Halifax, birmingham mid shire also do them.