Want to do self-build but i'm a First Time Buyer - HELP!!!

maynard_2

Hi Guys,

I'm looking for some advise/suggestions.... bear with me while I explain the situation....

After mulling over getting on the property ladder for the past few years and saving what I would consider to be a reasonable deposit (£10k), I have decided that the best way to get on board and build equity fast is to do a self build with the view to possibly selling once complete and buying something else..

Just to give you an overview, I am a quantity surveyor for a large national contractor so I know a little bit about building (5 years experience) as well having practical experience of assisting my Dad build a bungalow and several home extensions.

Anyway, I saw a piece of land advertised on a local EA's board last week, arranged a viewing and have subsequently made an offer (ridiculously low!!! - hasn't been accepted). However the estate agent has stated a figure that the vendor would accept and it is not unreasonable (although I'm in no hurry to meet their valuation).

There's just one problem.....

I have been to see a mortgage broker this evening and asked him if it is possible for the him to get me a mortgage to buy the land (it currently has a shack of lightweight construction sitting on it – i.e. can’t mortgage) and enough to build a new house on the plot. He has informed me of the following.

The bank will not lend me the money to buy the plot as they will not give a mortgage on land. However, once I have bought the land using other means of finance - he suggested a commercial loan - he will be able to arrange a self-build mortgage no problem. Once the house is completed, I’ll be able to re-mortgage the house and pay off the loan.

Only problem is – he thinks I’ll need a 40% deposit on the land (i.e. £40k!!!).

I fully understand the policies of banks and building societies and their reasons….. But there must be some other way??? As I say, I only have £10k deposit! Unfortunately, my Dad is currently building a bungalow so is unable to loan me the difference.

While I was with the broker I asked him how much I could borrow if I just wanted to go out and buy a completed house.

£300k!!! He said I could borrow 9.99 times my salary!!! I couldn’t believe it – I told him I wouldn’t be able to afford the interest on a £300k mortgage!!!

I was only asking for 100k for the land and 60k for the build. It’s madness!

Can anyone else advise if I have any other options? I’ve already designed the bloody bungalow and I’ll be damned if I’m gonna give up at the first attempt!

On the plus side, the broker said he would talk to the NatWest about the commercial loan tomorrow. I’ll keep you guys updated….

Thanks in advance for any advise. :beer:

Maynard

dwight-van-man

Have a look at the Buildstore website - they are a self-build one stop shop and they also can arrange self-build mortgages - either direct or through a broker if the broker registers with them

zag2me

Self build is usually far more expensive that buying a normal property, and usually requires a very large deposit just to get started. The advantage comes with the fact that you can build whatever you can get planning permission for.

Its not suitable for a first time buyer in all honesty.

toonfish

providing at least outline planning is available you should be able to finance this on a self build basis. You can get up to 95% on the purchase price of the land, and of the development costs with Buildstore as indicated. They package for a few different lenders though, so make sure you know exactly what you are getting into cost wise.

toonfish

zag2me wrote:

Self build is usually far more expensive that buying a normal property, and usually requires a very large deposit just to get started. The advantage comes with the fact that you can build whatever you can get planning permission for.

Its not suitable for a first time buyer in all honesty.

sorry mate but that's no longer true. There is a big self build market now, and while the rates are not the very best available they meet a need.

PoorDave

Agreed. According to Buildstore, you can get going with a 5% deposit. They also offer stage payments in advance rather than in arrears. Not sure what hoops you would have to jump through to arrange it.

Like someone said, rates are higher on these mortgages, but if you avoid a tie-in (not sure if these have one) then you can remortgage on completion of the build.

Supposedly, you save 30%-40% by buying land and building on it, compared to what you would ordinarily pay for the finished property.

Would it be possible to buy that land using a closed bridging loan?

toonfish

PoorDave wrote:

Agreed. According to Buildstore, you can get going with a 5% deposit. They also offer stage payments in advance rather than in arrears. Not sure what hoops you would have to jump through to arrange it.

Like someone said, rates are higher on these mortgages, but if you avoid a tie-in (not sure if these have one) then you can remortgage on completion of the build.

Supposedly, you save 30%-40% by buying land and building on it, compared to what you would ordinarily pay for the finished property.

Would it be possible to buy that land using a closed bridging loan?

they are easy to arrange, not many hoops to jump through as long as the mathematics work and have deals with no redemption penalty at any time. The usual process is to remortgage as soon as the build is completed.

maynard_2

Thanks for the advise guys. I am also currently speaking to another broker for a second opinion so hopefully I get something more positive out of him.

Zag2me, as I say I am in in construction (mainly large projects, mixed-use i.e. including residential) and am fairly clued up on costs (as a quantity surveyor). It will cost me approx £170k (including land, planning, build and financing) to build a bungalow that would be valued at around £235k once complete. Yes, I am a FTB, could you please elaborate on why self-build is not suited to a FTB??? Surely if someone has the knowledge and experience to build a house (whether it be laying the bricks or project managing) it makes no difference? Personally, I rather build a house and have 30% equity upon completion than buy a poxy 2 bed flat and have 0%.