Standard mortgage versus self build mortgage?
One of the major differences between a standard mortgage and a self build mortgage is the way the money is released. With a standard mortgage, the funds are released in one go, whereas with a self build mortgage the capital is released in stages throughout the construction of your house. It's a good idea to meet with your lender as soon as possible.
Some basic documentation such as a P60, letter from your employer and bank statements will be required. In addition to personal documentation, lenders will also want to see plans, specifications, a site map and proof of full planning permission.
It's a good idea to start the process as soon as possible. You can book a 30 Minute Mortgage Meeting with your local EBS advisor as a good starting point.
Getting on top of the paperwork
Once you have your self build mortgage in place you'll be working hard to manage the budget along the way. Building your own home requires a huge degree of organisation. For the duration of your build you will need to be meticulous about your paperwork, meetings and payments. Approach the job like running a small business. Set up spreadsheets with a detailed breakdown of costs which you should update as you go.
Be aware of the difference between a quotation and an estimate. A quotation is an exact written price for the job that you will expect a tradesperson to honour. However, an estimate is a 'best guess' but the final price could be more. Make sure the builder fully understands the brief and check if the quotation includes VAT. Ask to see the builder's public liability insurance certificate and make sure that the work is fully insured.
Limit the self build payment stages
Always include a contingency of 10-12% additional funding in your self build mortgage application. By doing this from the get-go, you avoid the cost of a top-up application or the chance of running out of funds if your project hits a snag. It's also a good idea to limit the number of payments stages; this can keep the cost of financing down.
Use a recommended qualified builder
Check the reputation of the builder you have in mind. Whether it's online of word of mouth, it's vital that your builder is respected for doing quality work, being forthcoming with information and being punctual.
Choose builders registered with the Construction Industry Federation. Set out a schedule for phased payments in advance and agree what percentage will be withheld until the snag list is complete. However, keep in mind the need to be fair. You can't withhold 5% of total build cost just because of a sticking door. But if you're dealing with a reputable builder finishing the snag list should not be a problem.
Self build location for reselling
If you're going to finance your own build, you need to be logical about the options to resell in the future. Building a sellable house in a sellable location can be bit of a catch 22. In rural counties, many of the houses in ghost estates that have been on the market long-term tick all of the boxes, apart from the one that says "on a public transport route to a choice of employment opportunities."
Keep on top of stage payments
A self-build mortgage requires even more patience than a standard mortgage due to the stage payment nature of it. Remember kids, patience is a virtue!
Keep your lender advised of the schedule for phased payments so you can ensure the paperwork is in order and funds are available to draw down as you need. Once your architect has signed off the staged payments get the paperwork to your lender immediately. When funds are released hand them over to the construction team straight away. They may be paying subcontractors and any delay in receiving payments could put your completion date back.
Are you thinking of building your own home?
Check out this handy guide to building your home in Ireland complete with stories from EBS customers who have already built a home.
The content of this blog is expressed in broad terms and is limited to general information purposes only. Readers should always seek professional advice to address issues arising in specific contexts and not seek to rely on the information in this blog which does not constitute any form of advice or recommendation by EBS Ltd.
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