18 Nov 2020
2020 has disrupted our lives in more ways than one. Which has led many of us to contemplate our future, and asking ourselves the question: Where do I really want to be? Whether you’re buying your first home, or moving, a self-build gives you complete control over the choice of how and where you live. Your dream home indeed!
At EBS, we have a special place in our hearts for self-builders. That’s because we have years of experience in offering the much needed support available to those building their own homes, and on top of that we have a specialised mortgage product too (which we’re just a bit proud of).
So if you’re thinking of building by direct labour or a builder, we have tons of useful info in our Building Your Own Home Guide (in plain English) and our Mortgage Masters are happy to chat mortgages, whenever suits you . That might be before work, in the evening or even on the weekend – handy! Read on for all the nuts and bolts of our self-build mortgage.
By rule of thumb, you can borrow 3.5 times your income. This will all depend on whether you’re a first time or a second time buyer - the Central Bank rules will come into play here, and the amount you can borrow will be based on your income, your house price, and your affordability.
For First Time Buyers, maximum Loan to Value (LTV) available is 90% of the site cost/value plus cost of construction or 90% of the valuation on completion, whichever is lower.
For Second Time Buyers, maximum Loan to Value (LTV) available is 80% of the site cost/value plus cost of construction or 80% of the valuation on completion, whichever is lower.
For many people the prospect of a family site being gifted makes a real difference when it comes to self-build projects. EBS recognise the inherent value of the site that applicants bring to the transaction, particularly a site with full planning permission and no borrowings. In many ways, EBS considers this to be like your deposit for the transaction and because of this, if required, EBS can lend the full property build cost (providing that the overall mortgage is within 90% of the completed property value limit for first time borrowers or 80% for second time borrowers).
Another major difference with EBS, is that the gifted site can be registered in one name with the mortgage under 2 names.
These are real and significant differences on how EBS assesses self-build mortgage applications and the financial assistance it offers borrowers.
We’ll also need to make sure you can still live within your means. The amount you can borrow also depends on what you can comfortably afford to repay monthly, this typically should not exceed 35% of your disposable income. It’s all about that comfort cushion.
Surprisingly, from speaking with first time buyers, many don’t realise that the government Help To Buy incentive is not just for those buying a new home as part of a development, but it’s also available to couples who wish to build their own home. To qualify, the new self build mortgage must be at least 70% of the final completion value of the property being built.
For example, a €250,000 self-build mortgage on a property that will have a final completion value of €320,000 would represent a ‘Loan to Value’ of 78.1% and would therefore qualify for the Help To Buy incentive.
The incentive is available to first time property buyers who wish to build or buy a home to live in as their home. The scheme works by giving a refund of taxes pain in the previous four years. To qualify you need to apply via the Revenue online app. You’ll be given an approval and application code which you can share with your lender to confirm that this balance of funds is available to you.
The amount you can claim on the scheme is the lesser of €20,000 or 5% of the completion value of the property for self-builds. However, the scheme was enhanced on 23rd July 2020, where until December 31st 2020, you can now claim the lesser of €30,000 or 10% of the completion value of the property for self-builds.
Initially, it was important for applicants to make the first draw-down of the mortgage between July 23rd and December 31st 2020 to qualify for the enhanced scheme. However, in their October 2020 budget announcement, the government confirmed that the enhanced scheme would now extend until December 2021 at the higher 10% level.
EBS have a different approach to self-build mortgages compared to most other lenders. Here’s why…
1. The project build cost
When lending for a self-build project, a great emphasis is placed on the cost of the build and the detailed breakdown of these costs. It’s important to take everything into consideration here to avoid underestimating any costs. EBS use a Detailed Costing Template, which is completed and signed off by the Supervising Architect/Engineer or Quantity Surveyor for the project. EBS allow borrowers to include costs such as Architects design fees, Legal fees, fees payable as part of your Planning application and utility connection fees. These fees can be included in the mortgage finance as part of an EBS self-build mortgage as they form part of your overall build cost.
2. Stage Payments
To help customers during their build, EBS release the mortgage in several stages after each piece of work is done which is especially favourable amongst the engineers and architects. For example, after foundations are laid, when the house is at roofed or first fix / second fix stage then finally at completion. In this way borrowers only make repayments on the portion of the finance that they draw down throughout the build rather than the full mortgage. In addition, EBS have a 6-month interest only option available, to keep build costs low and your first drawdown can be used for groundworks so you don’t have to use your own savings.
3. Free Course of Construction Insurance
One other great benefit of choosing EBS is that we offer free Course of Construction Insurance cover. This means that you’re covered while your property is being built, providing you with peace of mind.
EBS also offer free Course of Construction Insurance cover (this covers you for when the build is ongoing) for the property during the build which is a great benefit to borrowers and provides peace of mind.
4. Mortgage Masters, not call centres
There’s so much involved during a self-build, that real expertise is invaluable. That’s why you’ll have direct access to EBS Mortgage Masters who’ll support you throughout your build – you won’t be dealing with multiple staff in call centres.
5. 3% Cash back
Of course, another great reason to choose EBS for your self-build mortgage is our 3% back in cash offer. For example, 3% cashback on a €250,000 mortgage would give you €7,500 back in cash (€5,000 during the first 12 months of the build and €2,500 after 5 years). You can choose to spend the money however you wish, whether it’s to furnish your new home, take a well-earned break, or just put it aside for a rainy day – it up to you.
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 d.a.c.
EBS d.a.c. neither accepts nor assumes any responsibility in relation to the contents of this blog and excludes all warranties, undertakings and representations (either express or implied) to the fullest extent permitted under applicable law.
EBS d.a.c. is regulated by the Central Bank of Ireland.