Hi. We are hoping to start building our new house in the next few months once builders etc are sorted but before that we need to have an idea of our options as regards finance. We currently own a house with a mortgage of €230,000. The house is currently valued at around €330,000 based on sales figures for similar houses in the area. We're looking at a total build cost of around €300,000 so that would be €100,000 equity and €200,000 mortgage. What I'm trying to figure out is what our options are while the house is being built? Do we sell up, get the equity now and rent while the house is being built, or is some sort of bridging loan possible where was can just sell up closer to when the house is finished? I need to get impartial advice on this. My broker has suggested re-mortgaging the current house and taking out a second mortgage for the build so we can rent out the current house. This would leave us with mortgage payments exceeding the rental income and we could end up with negative equity if the housing market takes a dive. We'd also have to take out a larger mortgage on the new house which is not ideal as we'd like to keep it as low as possible so it can be paid off quicker. Anyway, that's the story. Any advice on our options? Anyone gone through a similar thing? Thanks!
Building House - Finance Questions!!
- Thread starter lfcfan
- Start date
I am in a similar situation & have arranged mortgage with interest only for the first 2 years so that we can stay in current house while building - we will then sell on house towards end of build & reduce new mortgage with equity released. Thats the plan at the moment anyway...
MortgageMate
Registered User
- Messages
- 105
In an ideal situation, you could sell your house to someone investing and then arrange to rent it back off them until such a time that your new house is ready. It would cut out the hassle of having to move twice, which you would have to if you were to sell now and rent elsewhere.
MortgageMate
Registered User
- Messages
- 105
Have you considered a bridging loan. Banks aren't overly keen on doing these any more, but it is an option you could look at. Also, you you may not build up much equity from now till selling time, but that's only my opinion.
Just one point about self building. It is a lot easier to get money from the banks once you have house at wall plate or even roof level. If you sold now and had the cash to get that started you will find it a lot easier to negotiate terms for your new loan of 200,000.
Self building is stressful enough but sometimes getting the money when you or the builders want it can be more stressful. You might also be in a position to rent closer to the build.
It also depends on your attitude to debt. Having an existing mortgage of 230,000 together with new payments on a 300,000 mortgage (remember you need 300,000 as you won't have your equity until you sell your own house).
Also you mention that your type of house is going for about 330,000 at the moment. If you mean asking prices, go see one of them and ask what actual offer would be accepted in the current climate (buyers market). You might be surprised but an offer at less than the asking price could be securing those houses.
Self building is stressful enough but sometimes getting the money when you or the builders want it can be more stressful. You might also be in a position to rent closer to the build.
It also depends on your attitude to debt. Having an existing mortgage of 230,000 together with new payments on a 300,000 mortgage (remember you need 300,000 as you won't have your equity until you sell your own house).
Also you mention that your type of house is going for about 330,000 at the moment. If you mean asking prices, go see one of them and ask what actual offer would be accepted in the current climate (buyers market). You might be surprised but an offer at less than the asking price could be securing those houses.