Self-Build Mortgage Already Own Land
- Expert Mortgage Advisers
- Access to competitive rates and some you can't get direct
- A community of Finance Consultants, Financial Advisers & Finance Brokers
Get in touch
Self-Build Mortgage Already Own Land
Diarmiud explains the process of getting a mortgage for a self-build if you already own the land.
Can I build on land I own? Can I get a mortgage on land I own?
Yes, you certainly could build on your own land. It actually makes things more straightforward, rather than having to borrow to purchase the land as well as the build.
If you already own the land, you’ll not need to borrow as much. That could be a great benefit when assessing affordability. It’s possible to get a self-build mortgage on that land, provided you fit the lender’s criteria. They could be trickier than standard mortgages, for several reasons.
What eligibility criteria do I need to meet?
With eligibility criteria, there are two different sides. For the mortgage itself, it’s fairly standard in terms of how much you want to borrow, your employment status, age, the term of the mortgage, your credit score and so on.
Eligibility of the land could be a bit more complicated. The land needs to fit the specific criteria for the self-build lender. Things such as shared laneways, flood risks, soil condition, adjacent commercial buildings or adjacent land owned by family members could be problematic for some lenders – but not all of them.
If you’re thinking of purchasing land for cash with the idea to get a self-build mortgage, I suggest getting a chartered surveyor or someone with specialist knowledge to inspect the land before you commit to the purchase.
How do I get planning permission?
Planning permission is a must before any self-build lender will even agree to assess a case for you. Legally, it can’t progress without planning permission. To get it, a formal application is usually made to your local authority or council.
But before you do that, you’ll need to have architect drawings, site plans and construction details. It’ll be beneficial to you to employ the services of a property planning consultant, as well as the usual reputable architect and builder.
Do you need a deposit for a self-build mortgage if you own the land? What if I don’t own the land?
You will need some sort of cash deposit or a reserve. Some lenders do allow the land to act as part of the deposit if it’s already owned outright, but they usually insist on a cash reserve to be kept aside – of at least 10% of the building costs.
Most of them will look for a bit more than 10% – some as high as 20%. It’s better to have a bit of money behind you, because building costs could run away sometimes. As we’ve seen in recent years, the cost of materials could suddenly increase.
Most lenders will ask for a deposit as well as owning the land, and that could range from 25% to up to 40%.
If you don’t own the land, it’ll limit the lenders available for self-build, particularly here in Northern Ireland. There are already fewer lenders here than you might get in England, Scotland or Wales. It’s still possible to borrow to purchase the land, but you’ll likely need a bigger deposit in order to do that.
Speak to An Expert
Expert Mortgage Advisers
We work with dozens of lenders
Access to competitive rates
We will work with you to understand your situation and needs, then develop personalised advice to help you achieve your goals.
How much will I need to borrow?
That’s quite a broad question. It’ll ultimately come down to your individual build costs, which will come from your architect, and also your deposit, or the value of the land that you’ve purchased or inherited.
Typically, the build cost will be quite a bit less than the final valuation of the property. In the long run, this makes self-build projects more cost-effective than purchasing existing properties. You won’t have to borrow as much in the way of a mortgage if you already own the land first.
Do you pay stamp duty on land for a self-build?
If you already own the land, there won’t be any stamp duty to pay – which is one of the main benefits of it, actually.
If you don’t own the land, or you’re seeking borrowing to purchase the land, you only pay the stamp duty on the value of the land, not the value of the property to be built. Either way, you won’t pay stamp duty on the actual build of the property.
Do you pay capital gains tax on a self-build?
Potentially. There’s no capital gains tax payable on any property that is your main residence, whether it’s self-built or not – at least for the period where it was your home.
If the property is not your main residence, then capital gains tax could be payable. Always seek the advice of an accountant or tax specialists for assurances on that.
Do you pay VAT on a self-build?
Similarly to capital gains tax, there could be an exemption on VAT, but again, the property has to be used as your primary place of residence. If it wasn’t your main residence, VAT could be charged.
What if I have bad credit and I want to get a self-build mortgage? How does that work?
On any mortgage, whether self-build or not, having poor credit history could hamper your application. Some lenders will either not lend at all or will offer lower Loan to Value ratios, which means you’ll need a larger deposit, or to wait a while to get your credit file up to the standard needed.
With the limited number of lenders for self-build mortgages already, and particularly in Northern Ireland, it’s advisable to get your credit file in good order before embarking on that self-build journey.
How can a mortgage broker help?
It could be a difficult, complicated process. Using a mortgage broker like ourselves here at Mint Mortgages and Protection could be invaluable for your project.
We could assist you with lenders, interest rates and eligibility criteria to find the mortgage that best suits your project. You have enough on your plate as it is with a self-build project – dealing with builders, architects and local authorities. So having someone like us there to lift a lot of that weight for you is definitely beneficial.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Why Mint Mortgages & Protection
Access to 1000s of mortgage products
Save money, time and hassle
Expert knowledge at getting you the best deals
