Self-Build Mortgage NI 2024

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Self-Build Mortgage NI 2024

Mint Mortgage & Protection gives us the lowdown on self build mortgages and how they work.

Is it hard to get a self-build mortgage?

It’s not necessarily hard, but it can be more complex than getting a standard mortgage. Fewer lenders offer this type of loan, as they are seen as higher risk.

Because of that, you will need to provide more detail on what you’re planning to do, the time frame, the cost, and how much the property will be worth once complete.

Are self-build mortgages more expensive?

Self-build mortgages may have slightly higher interest rates, mainly because of the uncertainties involved in self-building projects – ultimately, the project might never be completed.

The overall cost will depend on various factors; the size of the loan, the term and current market conditions.

Is it cheaper to build your own house or buy a house?

It usually works out substantially cheaper to build a home rather than buy one, as long as you have good construction partners and have got all your calculations right. It’s really important to do a thorough cost analysis before making any commitments.

Stamp duty on land is also much cheaper than buying a new house. Plus, when you finally move into the completed property, you won’t need to do any work or maintenance as you would when buying a home the traditional way.

Do you need planning permission for a self build mortgage?

Planning permission is essential for a self-build mortgage. Lenders need reassurance that your project complies with local regulations and has the necessary permissions in place.
They will want to see architectural plans that are approved by the local authority before they will consider your application.

Do many lenders offer self-build mortgages?

The market is fairly limited. Locally in Northern Ireland, self-build is quite popular so many of the local banks do have specialist products for self-builders. It’s a complex product, though, and every lender has a slightly different approach.

Working with a mortgage broker is the best way to make sure you find the right mortgage for your specific situation and your planned build. We’ll compare costs, features and criteria to recommend the most suitable option.

How does the application process work/differ for a self-build mortgage?

The application process for a self-build mortgage is similar to that of a typical mortgage, but with some additional requirements. You’ll need to provide detailed plans and cost estimates for the project, along with your financial information.

Lenders will assess the feasibility of the project and evaluate your ability to repay the loan. It’s essential to have a well-thought-out proposal and be prepared to answer any questions the lender may have.

You should also include a good contingency fund, as there’s almost always an unexpected challenge or a change of plan as the build progresses.

What are the stages of a self-build?

There are usually several stages to a self-build project depending on the type of property:

  • purchasing land
  • laying foundations
  • reaching wall plate level
  • fitting the roof
  • final fit-out and finish.

Usually the lender will release the funds in line with these stages, to ensure that the building is progressing as planned and within budget.

How long does it take to get a self-build mortgage?

The application and offer process is usually the same as a normal mortgage, once you have compiled all the paperwork needed. It typically takes around two weeks to gain approval.

How do you borrow money to buy land and build a house?

Typically, only a few lenders offer financing specifically for purchasing land. The standard approach is to buy the land in advance of seeking a self-build mortgage, and then get permission to build on it. To buy land, you usually need a minimum deposit of 25%.

Once you own the land or have a substantial deposit, you can apply for funding from a lender to cover the construction costs. A lender will then typically lend up to 75 or 80% of the estimated finished property value.

How do you fund a self-build house?

You usually need a 25% deposit, or to have bought your site outright before applying for funding from a lender. The rest can be borrowed from a lender in staged payments, which are released as the property is built.

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Do you need to own the land for a self build mortgage?

If you already own the land you will have a wider choice of lenders for the self-build mortgage. Some lenders, however, will lend you 75% of the land cost as part of your borrowing.
How much deposit do I need for a self build mortgage?
You will either need to own the land outright or have a 25% deposit to put towards the purchase of the land.

For the actual build you don’t typically need a deposit, because the money is released in stages. Once built, your property should be worth much more than you have borrowed, giving you instantly good equity on the mortgage – an important factor for lenders.

Can you use land as a deposit for a self-build mortgage?

Yes, this is possible. If you already own the land you are essentially providing the deposit, because you are making a financial commitment to the project. Because the funds are released stage by stage, there is less risk to the lender.

Can you get a mortgage on a half-built house?

This can be quite more tricky. Lenders like to be involved from start to finish, usually with the same architect or builder.

Most lenders are reluctant to provide mortgages for partially completed properties, as it poses higher risks for them. However, there are some options to finance a half-built house, and certain specialist lenders might accept the opportunity after looking at the details. Seek guidance from a mortgage broker to see if this might be possible.

What credit score do you need to buy land?

If you are buying land outright then your credit score doesn’t come into the process. It’s only if you need to borrow to buy the land that this becomes important.

Credit score requirements can vary among lenders. Generally if you have good credit, you’re likely to be offered better terms and rates. But lenders will generally look more broadly at your income, debts and your financial stability as part of the application.

How are self-build mortgages calculated?

Self-build mortgages are typically calculated based on the estimated value of the property once it’s finished. Lenders often offer up to 75% to 80% of this value, and you’ll need to contribute at least 25% yourself.

The lender’s assessment of your project’s feasibility and your financial situation will also influence the loan amount and interest rate. Lenders will look closely at the estimate from your builder. Materials, size of property, standard of finish and external landscaping are all factored into the loan calculation.

Will a bank finance a fixer-upper?

A fixer-upper is a different kind of project, as it’s adapting an existing property rather than creating one from scratch. Self-build lenders tend not to be as keen on renovation projects as they like to be involved in a build from start to finish.

One lender that’s fairly new to the market does specialise in this type of project. There are various ways that you can fund a renovation, so have a chat with us if this is something you’re considering.

Can you get a mortgage to renovate?

You can but this is a very niche area. It will depend on the property and what exactly is required. Some lenders offer a loan to cover both the purchase price of the property and the construction work, again releasing the funds in stages.

However, a secured loan could be a better option to fund renovation work. Once it’s done, you can take out a standard mortgage to repay the loan.

How hard is it to get a renovation loan?

Getting a renovation loan is more challenging than obtaining a traditional mortgage. Lenders evaluate the feasibility and estimated cost of the renovation project, along with your financial stability. It’s crucial to provide detailed plans, cost estimates, and demonstrate your ability to repay the loan.

Whatever your property plans are, whether you’re considering self build, renovation or a more traditional property purchase, just get in touch. We’re here to make sure you’ve considered all the options, opportunities and pitfalls before making any big decisions.

It’s our job to make your property plans come to life, with as little stress as possible.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The information contained within was correct at the time of publication but is subject to change (19/07/23).

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