Self-Build Mortgages NI

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Self-Build Mortgage NI

David Stirling shares his expertise on Self-build mortgages in Northern Ireland.

In just over 10 minutes you will know how to apply for a new Self-Build Mortgage in Northern Ireland.

Is it hard to get a Self-build mortgage NI?

Essentially it will be more difficult to get a Self-build mortgage because it poses a higher risk to the lender, in that the build may not necessarily be completed, and there’s also fewer lenders. It can be a lot more challenging than simply buying a house, but potentially more rewarding.

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

Self-build mortgages typically have higher rates of interest than traditional mortgages. In the end, however, they can work out substantially cheaper than buying a new home as Stamp Duty on land is cheaper than buying a new house. You need to think of the current costs of material, but usually the final value of the house that you build should be significantly more than what you’ve paid for it.

Do you need planning permission for a Self-build mortgage NI?

Usually, the lender will definitely want to see architect plans that have been approved by the local authority before they’ll even consider lending, so you would need architect or builder led plans and those need to be approved.

Do many lenders offer Self-build mortgages in Northern Ireland?

The market is quite limited but in Northern Ireland, all our local banks tend to lend on Self-build, so it is quite popular, probably because we have lots of countryside and families gifting land.

There are some of the bigger banks that will also lend, but not every high street lender is going to offer Self-build mortgages.

How does the application process differ for a Self-build mortgage NI?

The application’s going to be pretty much the same, the only extra things really are the plans from the architect and the costs from the builder, including a contingency fund to ensure the borrowing will cover the full build and any potential additional costs that may be incurred. 

How do you fund your Self-build house?

How you fund it changes from lender to lender, which is why it’s good to use a broker. Some lenders will lend on the land, but you need a 25% deposit for the land. Others will insist that you buy the land yourself and then they will lend stage payments after that.

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

This would be more tricky because typically the bank won’t have seen the builder or architect involved, and they prefer to be involved from start to finish on this type of project.

The new lender, Ecology building society, specialises in ‘fixer-upper’ type mortgages, but this is quite unique, and they would be the only one that would maybe entertain a half built house.

What credit score do you need to buy land?

If you’re buying land you don’t need any credit score because you’re not borrowing any money. It’s when you come to apply for finance or a mortgage that credit score would be more important, so you don’t really need any credit score to buy land.

How are Self-build mortgages NI calculated?

Typically the Self-build mortgage is calculated by the estimate from the builder, so you’ll get a list of materials, the size of the property and what the external landscaping is going to look like factored into the total cost to build the property. What the final property value will be is not factored in.

Can you get a mortgage to renovate?

It’s possible, but it’s going to be down to the lender’s criteria. Bridging Finance may be an option if it’s just short term to build. To renovate a property a standard Remortgage should be possible.

How can Mortgage Brokers like Mint Mortgage and Protection help with the application process?

We have contacts within all the local banks, and know of quite a big self-build lender that offers Interest-only mortgages, which keeps your cost down for the first couple of years. We work with a number of lenders that can offer you this type of loan, and can introduce you to them.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. 

We may charge a fee of up to £395 for mortgage advisory services and administration 

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The information contained within was correct at the time of publication but is subject to change. Podcast recorded on 10/10/23.

Self Build Mortgage NI (Part 2)

Diarmuid Phoenix continues the conversation about a self-build mortgage, answering more frequently asked questions.

How does a self-build mortgage work in Northern Ireland?

It’s different in many ways from buying a house in the traditional sense. With a self-build mortgage, the lender releases the funds or the money to the buyer in stages, not as a single amount. As the build progresses, they continue to release the money.

There are two main types of self-build mortgage. The first is an arrears-based mortgage where the lender releases money as each stage is completed. Effectively, you would need the funds to start the build yourself, often up to foundation level.

The other type is an advanced payment scheme, where the lender releases money before each stage of construction. This will obviously remove the need for additional funds or bridging loans. The stages can be fixed or flexible, but there are usually five stages depending on the type of building work.

Both banks and building societies offer mortgages to self-builders. Most mortgage companies don’t offer advance payments. In Northern Ireland there’s only one lender that offers that, because there’s obviously a higher risk involved.

What are the advantages and disadvantages of opting for a self-build mortgage in Northern Ireland?

One advantage of a self-build mortgage is being able to design your own home in the way that you want. It can also work out substantially cheaper to build a home than buy one. On an existing property there is also stamp duty – and buying land is cheaper than a house.

The cost of materials, the land and other costs need to be factored into the final value of the house, but it is usually higher than the initial investment. That’s a very attractive advantage for purchasers.

One of the disadvantages is that there’s a lot of red tape in the building process which isn’t involved when you’re buying a normal house. It can cause a lot of delays, and it does require a lot of patience.

Deep pockets might also be required along the way if things don’t go according to plan. You would need an extra pot of money for any unforeseen problems. Interest rates for self builds can also be a little higher than normal mortgage rates, but once the property is finished you can remortgage it onto a normal mortgage.

Are there any specific requirements or restrictions for self build mortgages in Northern Ireland?

We usually need a 25% deposit or for you to have bought or inherited the site before applying for funding from a lender. The rest can be borrowed from the lender in staged payments as the property is built.

The lender will want to see costs, architect plans, planning permission and building control approval as part of the process, so you need to have all that ready. We as advisors tend to ask clients about that before approaching a lender.

Are self-build mortgages available for both residential and commercial properties in Northern Ireland?

In Northern Ireland, only residential self-build mortgages are available.

How do the interest rates for self-build mortgages in Northern Ireland compare to traditional mortgages?

Typically lenders will charge a slightly higher rate, as a reflection of the risk involved. There’s the chance the project might not complete, if people run out of money, for example.

Where you would see normal mortgage rates currently around the 5% mark, self-build deals will be around 6% or even as high as 8% or 9%, depending on the lender.

There is one lender in Northern Ireland, Allied Irish Bank, who have an interest only self-build product which does keep the cost down initially. But whether it’s interest only or not, borrowers will only be charged for what they’ve drawn down at each stage and not for the full loan amount from the outset.

The monthly payments during the build process therefore start out lower and gradually build up as each stage goes on.

What are the typical loan to value or LTV ratios offered for self-build mortgages in Northern Ireland?

You 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. As it’s staged payments, once the property is finally built it should be worth a good bit in excess of what you borrowed.


Are there any government schemes or funding options available to support self-build projects in Northern Ireland?

No, unfortunately not. You need to have the income to fit the lender’s self build criteria and usually some funds set aside for emergencies. You do need the money to begin with – unfortunately there’s no scheme for this.

How does the valuation process differ for self-build mortgages compared to traditional mortgages in Northern Ireland?

It’s usually led by the estimate from the builder. Lists of materials, the size of the property, the standard of finish and external landscaping are all factored into these costs.

When you’re dealing with a normal mortgage and a property already exists, a surveyor will simply go and value the property in the traditional sense. On a self build mortgage that’s not possible, so it’s done through builder’s estimates.

How soon after completing can I remortgage my self build?

That will depend on whether or not the self-build mortgage that you’ve taken out has any tie-in periods. Typically self-build mortgages tend to be variable rate deals with no tie-in. That means you’re free immediately as soon as the build is completed to remortgage onto a traditional mortgage.

There are some fixed rate deals, but these would have tie-in periods for possibly a year or so. Most of the deals that go through our office tend to be variable rate ones, which we then remortgage to a traditional mortgage product as soon as the build is complete.

Can I get a self-build mortgage if I have bad credit?

It’s possible, but it will depend on the severity of the bad credit. There are only a small handful of lenders who offer self-build mortgages in Northern Ireland, and they’ll all have fairly strict criteria when it comes to poor credit.

Each lender has its own internal scoring system and each case is taken on its own merit. If you have particularly poor credit it may not be possible to get a mortgage at all, and self-build is no different in that regard.

Can I get a self-build mortgage if I’m a First Time Buyer?

Absolutely. Provided the applicants fit the lenders criteria, First Time Buyers are good to go like any other purchaser.

Can I get a self-build mortgage if I’m self-employed?

Yes, much in the same way as you can for a standard mortgage. If your self-employed accounts are all in order, you have your SA302, tax year overviews and calculations and the affordability stacks up with the lender’s calculator, you’d be good to go.

What factors should individuals consider before deciding to apply for a self-build mortgage in Northern Ireland?

Anyone who’s from here will already know there are a lot of rural sites and rural locations. Many self-build projects tend to be in rural areas where people have been given land from their families, but the site location is very important.

Lenders can sometimes have issues with self-build sites being adjacent to working farms, for example. Things like shared laneways and family members owning land beside the site can be a big problem for some lenders.

This really stems from the previous recession in 2008. There were a lot of self-build projects that were repossessed and lenders found it very difficult to sell the properties on. For example, if they repossessed a property from Mr Smith, but if Mr Smith’s father and brother own the land surrounding it, no one wanted to buy that land.

It’s very difficult for lenders if they can’t resell a property they’ve repossessed, so that’s why they take a strict view on that. It’s really important that you speak to a mortgage broker before you purchase any land for a self-build mortgage – otherwise you could end up buying land that you can’t actually build on.

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

The information contained within was correct at the time of publication but is subject to change.

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