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17 Jul 2018

Posted in:  Mortgage Master

Have you ever had a really important meeting (or had a heated discussion) when the pressure is on to say exactly the right thing?

Of course, what happens is usually the opposite – a feeble, unimpressive sentence will come from your mouth. Later on, when you’re making a cup of tea, the most perfect response imaginable will land in your mind, like a bad joke. Which in fact, is what it is. The French have conveniently summed up this awkward moment into an eloquent phrase: L’esprit de L’escalier, which literally means ‘the wit of the staircase.’ After all, who would tramp back up a set of stairs to give a comeback?

When it comes to your self build mortgage, it’s important to ask all the right questions, at the right time. In fact, it’s a big advantage if you can really grill an expert, to get all the nitty gritty details. Your build is one of the biggest purchases you’ll ever make, after all – not a time for second thoughts or late realisations.

EBS’ Mortgage Masters have been selling mortgages for eight decades, and they have been asked all the self build questions under the sun. We’ve shared some below so you can get the most from your mortgage meeting – all you need to do is turn on the grill.

Self build mortgage questions: getting them right

Self build questions, a bit like the self build itself, come in stages. As you move to the next phase of the project, so come the fresh wave of questions, and some frantic scrambling to resolve the issues. But sure, how would you know what to be asking, if you don’t know what to expect in the first place? Read below to get the ball rolling for your initial mortgage meeting.

1. I’ve spotted a nice bit of land. How much can I borrow for a self build mortgage? What do the funds cover?

Funding a self build mortgage works a bit differently to funding a house, as valuation and costs required will be a little more difficult to pin point. The Central Bank limits still apply, which means first time self builders can borrow up to 3.5 times their income, at 90 percent of the ‘property value’.

The funds can also cover the cost of an architect or interior designer – it’s important to include these in the valuation. To be on the safe side, many self builders will factor in 10 percent ‘emergency’ funding, which will cover any unforeseen snags or cost overruns.

But the property doesn’t exist yet! How do I know the value?

Good question. Well, you will need to get an initial valuation from a qualified architect and chartered building surveyor, who will help you draft your building plans, and will need to verify them. Once you have clear idea of what you want on paper, they will qualify your plans, and give you a price estimate – documentation which you can then bring to your lender.

What about planning permission? Do I need this before applying?

Yes – you will need planning permission, and your pricing valuation documents, before you get mortgage approval in full.  However, you can get ‘Approval in Principle’ in the meantime, which is provisional approval based on your affordability to fund the mortgage repayments. This provisional mortgage approval usually lasts six months, though – so it’s a good idea to get your planning application in as early as possible.

To save yourself the pain of redrafting build plans, why not research your local council building requirements and restrictions for your area before you begin?

I’ve just been approved! Can I draw down my self build mortgage before the work starts to cover the trade and construction costs?

A self build mortgage is draw down in stages, so each phase of the project is signed off by the surveyor, and then funded by the bank. Each stage of the build is determined by your initial build plan – but it’s a good idea to keep these stages to a minimum.

You can draw down the first portion of the mortgage once the first stage of the work is completed. You will have to use your own savings to fund the start of the build and the site purchase – this is so the surveyor can begin to assess the value of your build. As the work progresses, your architect or building surveyor will fill out a ‘Stage Payment Certificate’, which is proof the initial stage has been completed, and your solicitor can request this from the bank.

How do I know when to request my funds for each stage of draw down?

Ensure that planned expenditure matches the drawdown amount for each stage by requesting detailed quotations for each job before completion. Some self builders find themselves on uncertain ground when they rely on estimates, which are only rough guides to job costings, and are not set in stone.

So make sure the distinction is made early on, and only use final quotations when budgeting for each stage of your drawdown. 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.

You can draw down the final stage payment only when your valuer supplies a ‘final valuation report’ outlining the final value of the house.

Want to chat to your local EBS Mortgage Master?

If you have some burning self build  questions of your own, you can get some free Mortgage Master wisdom in your local area. Book a mortgage meeting to suit you with one of our mortgage expert, try out our mortgage calculator or get the ball rolling with our First Time Buyer guide.

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