Selfbuild mortgage financing

Discussion in 'Mortgages and buying and selling homes' started by cs1976, Sep 13, 2017.

  1. cs1976

    cs1976 New Member

    Posts:
    6
    I would be grateful for some advice on behalf of a friend. Father gifting son a site worth 350k. Gift tax payable as it is over the 310k threshold plus vat due on gifting the site 13.5per. Cost of build 350k, but son can only get 210k mortgage and any savings he has will go on paying vat, tax etc. The value of the house once finished will be approx 850k.
    There is a shortfall of 140k. Father does not want to take an equity share in the house, he would like to just loan the 140k and in a few years if son cannot pay it back then sell the house and get his 140k back at that point.
    In terms of getting a mortgage, will the bank approve the mortgage 210k or say no you cannot afford to pay the mortgage and pay back a loan of 140k. Or would they take into consideration the loan of 140k would be repaid in a few years time on the sale of the house?
    thanks in advance
     
  2. Monbretia

    Monbretia Frequent Poster

    Posts:
    1,131
    In my opinion the bank will not lend for the house if the applicant cannot show full funds to build the house whether by way of the mortgage they are giving or that plus other funds. If the other funds consist of a second loan then that will be built into affordability. They are not going to lend with say 140k of a bridging loan sitting there dependent on the house being sold at some stage in the future.
     
  3. cremeegg

    cremeegg Frequent Poster

    Posts:
    1,807
    No they wouldn't.

    The bank probably will not go along with that either.