Self build mortgage, buy land now then remortgage later for the build?

Red_Arrow_X

Looking for some advice to see if the following is possible / normal.

Wife and I have seen a plot of land for sale in my home town that is perfect. Issue is we live at the other side of the country and aren't planning on moving back for at least another 18 months. We don't want this plot to slip away, nothing like it has come on the market in the last decade like it in this area.

We could afford a mortgage right now that covers the cost of the land but not the build. Is it possible to get a mortgage to just cover the purchasing of the land then at a later date remortgage to cover the build costs too? If this something that happens?

In 18 months we can sell up where we're at, pump the equity from the house sale into the new build to lower the overall mortgage and just live with my parents while the house is being built.

Red_Arrow_X

Just to add further. I can see with self build mortgage they release money at certain stages. Wonder if we could get one for the whole build cost and land purchase, but postpone the build for up to two years and only pay interest on the money released to cover the land purchase only till we're ready to move on to the next stage?

davidmcn

Does the site already have planning consent?

Thrugelmir

As an example here's Halifax's current self build criteria. Crunch the numbers! 

• 
  Maximum loan to value – 75% of the final valuation and the loan must not exceed the total cost of buying the land and cost of build works.
• Funds may be released at the end of the following 5 stages:
  • Land Purchase
  • Footings and Foundations Stage
  • Construction of the walls (Wall Plate Level)
  • Roofed In
  • Internal/Final Completion
• The initial release can be up to a maximum of 75% of the current value. Where funds are being released for land purchase it must also not exceed 75% of the price of the land paid by the applicant. Where all the land has been gifted the first instalment will not be released until footings and foundations stage has been reached. When the construction reaches the appropriate stages, further releases up to a maximum of 75% of the current value at each stage less the amount we have already released can be considered. However, for the penultimate stage release a minimum of 10% of the total loan will be retained, as a final release, until the property is complete and we are in satisfactory receipt of the final completion certificate.
• Stage releases are subject to a satisfactory re-inspection by our valuer and provision of the appropriate Architects certificate/Building Indemnity cover for that stage.

Red_Arrow_X

davidmcn said:

Does the site already have planning consent?

It does.

Red_Arrow_X

Thanks Thrugelmir I did see that. I'm not 100% sure on how the deposit works with this. In the Halifax example are they saying each time they release money we have to put up 25%?

Basically, if say we took our a self build mortgage for £400,000, are we expected to put up £100,000 deposit on day one or say if stage one to purchase the land was £150,000 we only need to deposit 25% (£37,000) of that?

Of course it goes without saying we will speak to an expert about this. Just right now trying to get a feel for the numbers to see if it's even possible before proceeding further.

[Deleted User]

Purchase land of £150k then you need to have a 25% deposit so can have max loan of £112,500
Next stage is at the Footings and Foudations.  The lender will revalue and say 'if we had to sell in its current form its worth £190k.   Max loan is 75% of £190k so £142,500.   This means they will release a maximum of £30k at this stage as youve already got £112,500.

Next stage the house may be worth £225k so they will release 75% of this which is £168,750. You can take a max of £26,250 as youve already got £142,500

se2020

I looked into self build a few years ago when I was looking to buy a barn with planning permission.

The first problem was the mortgage lender would not accept that I wanted to do most of the work myself and needed me to show them a full set of guaranteed prices to complete the whole conversion. Getting the quotes for this was going to cost me a fair bit of time and money but at the same stage the seller would  not accept an offer or remove the house from the market without seeing my mortgage offer.

Second problem was they would base the mortgage on the finished value of the house and that was a value higher than my income would support.
Third problem was they needed me to have a 20% deposit of the finished value rather than the cost of just the land/barn.

I could not find anywhere that was prepared to lend against only what I was actually wanting to buy. My original plan was to just mortgage 80% of the barn/land cost, do enough work myself to make the place liveable over a year or 2 paying for the works from  my own income, switch to a standard residential mortgage after that then continue the remaining works over the next few years.
I could not find any finance to suit this plan, some places even insisted all the work had to be completed within anything from 2 to 5 years.
I came to the conclusion that the only way to do it is either have enough cash to buy the land/barn outright or have enough equity in an existing property to remortgage that.

But to answer your question, yes, it did look to me like you need at least the whole £100k up front.

se2020

As in the Halifax example shown above a lot of lenders also wont give out the full amount until the project is finished so you need to account for that as well. It looked like a problem to me as I would need the money when I was paying for the building work not once the place was complete?
I suppose you could get the building signed off as completed then draw down the remaining funds and use them to buy expensive paint or a posh power shower or something but it basically ment another 10% of the build costs I would have to find myself.