Mortgage on unemcumbered property query

jimpix12

Hi all, I am planning to buy a plot of land in the next few weeks and have a home built which I'd project manage - but it's all very much in the early stages and am just checking all my ducks are aligned.

I am planning to lend myself money from my company to buy the plot + complete the build, if my figures add up correctly, but I would need to remortgage it at the end. Currently I have no mortgage.

Obviously I would prefer to get a mortgage earlier on in the build process and lend myself less , but I understand there are very few/no lenders that will lend on an incomplete house. So the property would I think need to be finished , then valued and then I'd need to get a (re)mortgage on an unencumbered property, my LTV would be about 25%. Once the mortgage comes through I would then pay back my company.

Is all of this correct - and fairly straightforward? Or should I be worried and am missing something. Just wanted to check before even considering this idea further.

(I am confident I could pass the normal tests for a regular mortgage)

waveneygnome

Why don't you look into 'self build mortgages'.

If you google 'Buildstore' they have been offering these types of mortgages for a while.

They offer stage releases of funds (either in advance or arrears) as and when you build gets to certain stages e.g foundations, then wall height, roof on etc...

Interest rates tend to be slightly higher than normal high street rates, to reflect the higher risk, but at the end of the build process, you could then re-mortgage to a normal lender for better rates with a finished house.

jimpix12

Thanks, I'll look into it. At first glance their tracker rates are about 6%, which (without wanting to bore anyone to death) is almost double the loan interest rate that HMRC sets for directors loaning themselves, which is about 3% I believe. So the overall comparison isn't as favourable but I'll definitely check it out as it seems lower risk.

silvercar

I am planning to lend myself money from my company to buy the plot + complete the build, if my figures add up correctly, but I would need to remortgage it at the end. Currently I have no mortgage.

How are you structuring this?

1. A loan from the company to yourself
2. a private mortgage (registered on the deeds) taken out with you as the property owner and the company registering first charge
3. The company owning the property and then selling it to you.

You may need input from solicitor/ accountant/ mortgage broker which is the best way to go.

jimpix12

Hi silvercar

I plan it as follows: a Director's Loan from some of the cash sitting in my company account, to me directly (bullet 1) which I'll use to buy the plot and get the builders to start.

I have a small house currently (not mortgaged) which I have a buyer for, touch wood, and will use the funds from the sale to pay off some of the DL and put towards build costs. I'll live on site (caravan) thereafter.

Finally once new home is all completed I'll get a mortgage on it ("unencumbered") and pay off as much of the DL as possible; the remainder of the DL will be converted to dividends/income.

I've already cleared it with my accountant, the only issue is if I can actually get a mortgage easily on a home that isn't run-of-the-mill. If I can't then I'll be up the creek!

silvercar

I've already cleared it with my accountant, the only issue is if I can actually get a mortgage easily on a home that isn't run-of-the-mill. If I can't then I'll be up the creek!

One for a mortgage broker then.

Possibly depends on what makes it not run of the mill and the particular lender's view on mortgaging to pay off debt. You could run it past your business bank manager as an initial query.

jimpix12

Thanks. Can you get a preliminary yes/no even if the house hasn't been built yet, normally?

I'll book in with a mortgage adviser just to be sure, tomorrow.

silvercar

spunko2010 wrote: »

Thanks. Can you get a preliminary yes/no even if the house hasn't been built yet, normally?

I'll book in with a mortgage adviser just to be sure, tomorrow.

You can get an opinion on whether it would be possible under current rules, always the risk that rules will change.