Mortgage for Entrepreneurs Series: Self-Build Mortgages

Self-build mortgages, to build your own home, and are becoming more accessible, as planners recognise the significance of one-off housing outside of urban areas.

This mortgage provides finances through the different stages of the self-build process, so borrowers can fund their home construction, normally over an 18-month term.

Regular Central Bank of Ireland lending rules apply. If you are a first-time buyer, you can get 4 times your combined income, and 90% loan-to-value (LTV). Some banks lend 100% of the build cost, if the site is already bought or inherited, and lending is within the ‘Estimated Future Value’; that’s a simple calculation taking the estimated current value, interest rate and loan period.

Self-builders should show they have an extra 10% of the total cost to cover unforeseen build expenses. The cost of any special conditions, attached to planning permission, must also be included in the calculations. And, the mortgage applicants’ own funds go into the project first.

The mortgage process can take up to 12 weeks from initial application.

• Approval in Principle

Most lenders will approve an application without full planning and full costings, so borrowers can review their options before committing to further expenditure.

• Planning Permission

Before the ‘Full Letter of Offer’ on a self-build mortgage, lenders typically require valid planning permission for the construction project.

• Architect/Engineer’s Costing

Lenders often request an architect's report to confirm the build cost, and, on the final stage drawdown, they need a final report and ‘certificate of compliance’ to confirm the construction complies with building regulations and planning.

• Stage Payments

Instead of getting the full mortgage amount upfront, funds are released in stages during construction, so borrowers access building funds when needed.

• Flexible Repayment Options

Some self-build mortgages offer interest-only repayments during the construction phase, which eases the financial burden.

• Valuation

Lenders initially request a site valuation and confirmation of the estimated final property value. A final market valuation is then needed when the build is complete.

In today’s housing market, where families with two people working cannot afford a home, planners and lenders are recognising the importance of self-builds, especially in rural and regional towns. Self-build properties can be accessible, affordable housing, for so many, that drives economic activity and preserves cultural heritage, sustainability and community.

And that is worth building!

ENDS

Margaret Barrett is Managing Director at Mortgage Navigators, a brokerage specialising in lending for professionals, self-employed contractors and business owners. A Qualified Financial Advisor (QFA), Barrett previously worked with Bank of Ireland.

See https://www.mortgagenavigators.ie

For information contact:

SHARON BANNERTON, Managing Director, BANNERTON

M: + 353 87 6731100 E: Sharon@BANNERTON.ie