Mortgage Approval Self Build

J

Jolly Man

Registered User
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Hi there,

Have been approved for €320,000 hoping to build the house for no more than €240,000 is it better to take the €320,000 and not draw down the money you dont need, or would we be better taking out a mortgage of the lesser amount and hope to come in on budget?
 
Be conservative!
Retain the maximum amount of flexibility!
Don't draw down monies until you have to, therefore the most you should draw down is €240k. Start your repayments as soon as possible....it has a massive impact in the long run. Make sure that your provider gives you flexibility to repay a little extra. Best of luck to working within budget!
 
Thanks for the reply, so if i initially go for the mortgage of €320k am i paying back on that value until i have taken my final drawdown from the bank and they know how much i have taken out do the repayments then go back to the value of final drawdown sum?
 
You'll only pay interest on the amount you've actually drawn down, so if you draw down a stage payment of €100,000 at first, that's all you'll be paying for. Then when you draw down more and have borrowed €240,000 that's what you'll be paying for.

Liam D. Ferguson
www.ferga.com
 
Having extra funds available has both advantages and disadvantages. The advantage is that quite often self builds go over price by 10 to 20% in my experience. If you have the extra already there you may save yourself legal and land registry fees as otherwise you could have to go for a new or additional mortgage.

The disadvantage of course is that the money is a temptation- it's much easier to persuade yourself to upgrade on luxury items if funding is readily available. I often even see people using extra funds to furnish and decorate a house- a few years ago people wouldnt dream of this and would just build the house and then buy other items as they could afford them- even white goods. You could end up paying over the entire term of your mortgage for goods which have long since broken down etc.
 
Just to add to Vanilla's point. As rates go up, the banks will lend less so if the OP needs extra finance in the future, he may find that he cannot get it.
Obviously this depends on his financial profile.
 
Would there may be legal issues with the bank if you sign a contract for a mortgage of a certain value but then only draw down a smaller amount? I seem to remember something like this in my IIB self build mortgage.
 
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