Can I re-mortgage to self build a house?

sparkys2003

I currently have an offset mortgage and owe very little on my house which is worth in the region of £250k.

I want to self build a house and still keep my own for the time being, but need an extra £80k.

I know there are several self-build mortgages out there but the interest rates are not worth looking at. I appreciate that they are more expensive due to the risk element involved but in my case there is no risk as I will be able to pay it back when one of the houses sells at a later date. Additionally, I have a bond maturing later this year that would pay it off anyway.

This opportunity has come now and will probably not be available when my bond matures so I need the equity release as soon as possible.
I have contacted my mortgage lender and they want to know what the money will be used for. I have not told them yet as I am almost certain they will not lend me the money if they knew it was to self-build. Is there a way round it?

I would be able to pay the money back to my offset account in less than a year, but self-build mortgages seem to last a minimum 2 to 3 years at a much higher % and early repayment penalties.

Does anyone have a solution please?

kingstreet

Do you want to remortgage or do you want to stay with your existing lender?

If it's the latter, you are requesting additional borrowing and need to know if they will permit lending for a self-build?

Let us know who the lender is and see if anyone has any experience.

There are plenty of lenders who'll lend you the money to do this by remortgaging your current home. Subject to the usual criteria and valuation of course.

holly_hobby

If you are releasing equity from your residential property this in itself is not a self build mortgage, as it is not to be secured on the new unit to be build (i.e the property you intend to build).

So as long as your income, status and resulting LTV on your current main residence, are within the lenders criteria - there really shouldn't be too much of a problem - sticky areas for equity release are new business start up and anything relating to HMRC i.e payment of taxes, etc. The only point they may raise is your intentions for the 2nd property (which may be seen as business start up if you are building to purposely sell as a developer).

A self build mortgage, is a mortgage that is released in stages, i.e at each point of build, from foundation (or first fix), and onwards, after inspection at each point of release request. The overall amount available is based on income and the estimated value on completion.

Where as sourcing the funding from your existing property, may allow you to release the total (estimated ?) build cost in one go - which is obviously much easier re payment for build materials/contractors/etc ..

Hope this helps

Holly

sparkys2003

kingstreet wrote: »

Do you want to remortgage or do you want to stay with your existing lender?

If it's the latter, you are requesting additional borrowing and need to know if they will permit lending for a self-build?

Let us know who the lender is and see if anyone has any experience.

There are plenty of lenders who'll lend you the money to do this by remortgaging your current home. Subject to the usual criteria and valuation of course.

Thanks for your reply kingstreet.

I would sooner stay with my existing lender which is Scottish Widows.
I have contacted them by email and they want to talk to me about what I need the money for. I have not phoned them yet as I did not want to say the wrong thing and harm my chances of getting the extra capital.

Conrad

Call anonamously and just ask what is and is not allowed and go from there.

sparkys2003

holly_hobby wrote: »

If you are releasing equity from your residential property this in itself is not a self build mortgage, as it is not to be secured on the new unit to be build (i.e the property you intend to build).

So as long as your income, status and resulting LTV on your current main residence, are within the lenders criteria - there really shouldn't be too much of a problem - sticky areas for equity release are new business start up and anything relating to HMRC i.e payment of taxes, etc. The only point they may raise is your intentions for the 2nd property (which may be seen as business start up if you are building to purposely sell as a developer).

A self build mortgage, is a mortgage that is released in stages, i.e at each point of build, from foundation (or first fix), and onwards, after inspection at each point of release request. The overall amount available is based on income and the estimated value on completion.

Where as sourcing the funding from your existing property, may allow you to release the total (estimated ?) build cost in one go - which is obviously much easier re payment for build materials/contractors/etc ..

Hope this helps

Holly

Thanks Holly for the reply.

I have self built before around 20 years ago and was governed by the money that the building society would release. I had a right argument with them as they would not release capital until a certain stage was complete. The job vertually came to a standstill and nobody was going to benefit. Never again!

All their criteria should be met, LTV, income etc. its just the returning email from Scottish Widows did not seem too enthusiastic about short term loans when I stated to them that I could pay the extra mortgage off with the maturing bond around November time.

I do intend to sell the property after a couple of years and use the profit to build another one to live in permenantly. They might see this as a business venture but I do not intend to become a property developer.

sparkys2003

Conrad wrote: »

Call anonamously and just ask what is and is not allowed and go from there.

Will do Conrad, just needed to get an idea of what route to go down first.
Thanks.

sparkys2003

Just had my answer from Scottish Widows. A blunt "Dont do short term loans"

Looks like I will have to look elsewhere.