Mortgage Advice for Self-Build

cheap-information

Just after some advice as wanting to go ahead with building our own property. We are trying to juggle a variety of funding options and our finances are relatively complex.


Ultimately, we currently have £110,000 in cash available. The land we are wanting to buy is probably £300-£400k. We are then aiming to spend approcimately the same amount on the build. Funding £800k with a £100k deposit I know will be realtively difficult, and even more difficult as I have an employed income of ~£55k and my wife is self employed and shortly going on maternity.

We currently have a flat without a mortgage (~£500k) and a buy to let with mortgage (£300k value with £150k equity). However, we are not looking to sell either of these properties and the BTL has another 3 years on the fixed mortgage to run.


Our issues are:


1) I know that I could borrow around £250k on my earnings as I currently have no mortgage in my name. This would still only give us £350k to to play with with a £800k build cost


2) I know I can easily mortgage my current £500k flat (where we live) for approximately £300k. However, whilst the house is being built, we would be living here and so a BTL mortgage wouldn't be appropriate. We somehow need to get cash out of the property. If I took a residential mortgage out then it would be difficult as it would make the mortgage on 1) reduce and leave me in much the same position



3) I know I could transfer the BTL mortgage (£150k equity out of £300k) to a new provide and take another £75k cash out to leave myself with 25% equity but I would be subject to a variety of early repayment fees


4) I know that I could sell my current £500k flat but we are holding onto this property regardless and do not want to sell it. We are happy to borrow off it however.


5) My wife earns around £80k but is self employed and going on maternity leave without maternity pay so I am currently removing her from the equation




Does anyone have any advice or wise-ideas? If the above is impossible, then we could always wait a few further years to save more money but this will probably be £60k a year which is a relatively small amount compared to the build cost.


Any help would be much appreciated!

billymadbiker

I have been looking into the same thing.
Best I can find so far is a max of 80% ltv .

I am self employed, gross of 65k.
Mainstream lenders go to 4.5x income.
I did find one lender who will work on affordability rather than income multiple which helps as I have no dependents or other credit.
Best they would do is 330k though.

It's come to a stop at the moment as the plot I was looking at is 250k and build cost is (guessed) another 250k. One problem is they want proof of 100k deposit up front and they want planning permission and designs etc before looking at the lending. I don't really want go spend out on the planning etc as the sellers have had plenty of interest in the plot so don't want to take it off the market while I apply for planning etc. I also k ow a few developers have been looking at the site so I can see a bigger offer coming in from somebody else if I was able to get planning on it!

Only way I can see it working is if I had enough cash to buy the plot, then take the risk of getting the planning, then i would be able to use the 250k plot as a 50% deposit on the build. I don't have that amount of cash though!

I did find another lender that would just want to see a 40% deposit for the plot and some outline plans and would lend against that. They would then lend against it again once planning was granted and in stages during the build.
Sounded good but rate was 7%, it had to be an eco/ class AAA energy efficiency (would add at least 50k to the build cost) and worse bit was it had to be completed in 2 years and I was budgeting for doing a lot of the work myself which is going to take longer than that!

billymadbiker

I suppose one option for you would be to mortgage the flat for 300 plus you 100 of the cash to buy the plot.

Use the other 10 you have in cash to get the designs drawn up and get planning on the plot.

If the area is anything like the plots I have been looking at then planning will increase the value by anything between 50%-150% so might be worth looking at what options that would give you if you had that extra equity in place.

Ultimately, I think you will struggle as although you may well end up with a 1million+ house, basically you will be trying to borrow 690k on an income of 55k.

billymadbiker

Alternatively, if you can buy the plot as above, spend 60k a year on building the house and you should be able to move in to it in 4yrs time, finished in 5-6 and have paid off 20% of the 300k mortgage.

cheap-information

billymadbiker wrote: »

I suppose one option for you would be to mortgage the flat for 300 plus you 100 of the cash to buy the plot.

Thanks for that but the issue is, as I will be living in the flat whilst the build is going on, I won't be eligble for a BTL. Could take a residential mortgage out quite easily on the flat but then that would mean not being able to take a mortgage out on the new place


The main issue is cashflow. After moving out of my property, I can easily get £300-£350k cash (leaving with £400k for build) and then I would only need £250k to borrow which should be easily do-able. But I cannot get that cash out of the property as I will be living in it.


Alternatively, if my wife can show £6-7k income per month for the last 4 months, do they need to know about the maternity next year?

Thrugelmir

Something has to give in your approach. You have the assets at your disposal to fund the project if it's truly your dream.Have you considered renting for the duration of the build?