How do I go from our first home to building on a site?

S

Super Sesame

Registered User
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Hi,

I'm confused about how this process will work. This is our situation.
We have a house worth around 300,000. Our mortgage has 150,000 remaining.
We are making over payments every month of about 500 and have been for over a year.
We have about 15,000 in savings, adding about 1,000 each month.

We'd like to buy a site and build on it. A site would cost around 140,000.

I'm not sure how we will manage in the building phase.

Can we keep our house until after the site house is built to avoid renting? In the area we live in, rentals are very hard to find and I'd rather move my family once instead of twice.

To do this, can we get a mortgage for the site on top of our current mortgage? Would a bank do that? I know I will go into my bank and ask but it would be good to hear how others do this.
Because we are making overpayments anyway, we have shown the bank we could afford the additional mortgage, it would be overall about the same as the mortgage + overpayment now.

Should I stop making the over payments, and save that money each month so we build up a bigger saving pot and use that for a site deposit?

If we can do that, we plan on holding off building the house for a while until we can save more (maybe wait 6 months between buying site and building). But I'm not sure what is the best way to do it. Do most people sell their house first and rent while waiting for the house to be built?
 
To add some figures like everyone else does, we are on an Ulster variable of 3.2% with combined income around 100,000. I've a good relationship with my Ulster mortgage broker so I will talk to him too, but I'd like a few ideas of what I need to ask.
 
Normally you can borrow up to 80% of site cost but how are you going to fund the build? If you want to keep the original house until new one is built then you would have to be able to afford both the existing and new mortgage, you wouldn't have much left to be building with taking into account site and existing house mortgage and lending multiples.

Years ago what you would have gone for was bridging loan to bridge the gap between building and selling but that isn't done anymore.
 
Thanks, yes that's what I was wondering too, but I hadn't planned that far ahead yet.
Assume living somewhere in between is inevitable, but hope we can do it for short a time as possible. It might have to be a mobile home/cardboard box on site
I don't know on building costs at all. It's very early stages. The planning permission is for a 2000 sq ft house.

If those bridging loans were a thing but are not anymore, do most people rent/live with family/in a box while house building now?
 
I'd say look at building costs before you go any further. You will have in theory 150k left after selling house and 15k savings, site is costing 140k, you will need to substantially increase your mortgage to build a 2000 sq ft house compared to your present mortgage.

I'd imagine most people rent, personally I did the mobile home bit in parents back yard but that's not as popular anymore as people won't live in such a small space :)
 
I'm in a similar situation but I own a site adjacent to the house. To finance the build however I'll have to:
  • sell the house minus the site
  • pay off the outstanding mortgage
  • Get approval for self build mortgage (must include cost estimates from Architect on form provided by bank)
  • Bank does valuation off of house plans based on location
  • Pay deposits for timber frame kit and windows
  • line up builder (if I can find one!)
  • Wait minimum 3-4 months until agreed date with suppliers and builder arrives
  • Issue commencement notice with Council, pay fees etc
  • Start Build
This assumes you've planning permission. You can purchase a site subject to planning and you can apply for PP if you don't own the site but you need a letter from the owner stating their permission. Removes one risk....

One option I'm considering is renting back my current house from the new owner for 6 months under a caretaker agreement. The new house won't be finished but at least the worst of the groundworks etc will be over and it reduces the time I'll need to find somewhere else to live. I've relations and friends in the area....! This approach however will narrow the list of potential buyers but avoids getting an annoyed new neighbour who has to live beside a building site for a few months with deliveries, tradesmen etc.

The annoying gap for me is having to wait until the sale goes through and payment received before booking the timber frame kit and windows, sizeable deposits both. Even if I get a flexible builder this means I could be waiting a year after moving out before being able to move into the new house...

I did talk briefly to the bank official about converting the current mortgage into a buy to let and getting a new mortgage for the new house (working from memory here). In the end what I could raise was nowhere near enough to complete the build which would not encourage a bank to make such a loan!

Make sure you get a Quantity Surveyor to do the cost estimates with you so you know exactly what you'll need to complete the build and be allowed to move in....There are LOTS of hidden fees, insurance, connection fees to consider too....VAT on site...etc
 
I don't know where you live at the moment or where you intend to build. This is important, because depending on the location, it's far cheaper to buy a new or 2nd hand hse that actually build. You'd be surprised at the amount involved.
 
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