Self-Build Mortgages are a common topic of confusion for those planning to build a home in Ireland, from issues surrounding eligibility and requirements through to how payments are made once approved. SelfBuildInIreland.com spoke to Michael Glynn of Mortgage Plus, Ireland’s leading mortgage broker about the options for the self-build market.
If you are looking to finance the building of your own home in Ireland, there are a lot of factors to be taken into account.
Lending institutions will require that you have full planning permission on your site and will need to see plans from your architect along with a full breakdown of the construction costs. The mortgage is normally broken down into “staged payments” where funds are drawn down at certain times during the building process, generally there are between three and five stages.
As a result you will only make monthly repayments on the balance you have drawn down so far.
Obviously there is a lot more work involved in a self-build project but an experienced Mortgage Broker will be able to assist you throughout the whole process.
Michael Glynn from Mortgage Plus, one of Ireland’s largest mortgage brokers, explains; ‘we deal with thousands of self-build mortgage requests every year, many applicants are not familiar with the stage payment procedures concerning self-builds so it can come cause confusion. However, as our consultants are used to dealing with so many clients we are able to explain the process clearly and assist at each stage of the ‘drawdown’ process. We also work with all the major banks in Ireland which allows us to recommend the most suitable lender to our customers.’ Better still, Mortgage Plus don’t charge a fee for this service as brokers receive their payment as commission from the lender.
Things You Need To Know
The key from the mortgage lender’s perspective is to keep the overall loan to value to about 90 per cent of the value of the site and building costs combined. Mortgage approval also depends on all other lending criteria being met.
Lenders will generally advance up to 80 per cent of the site value if there is full planning permission, and 60 per cent if outline planning permission is in place.
Subsequently they will approve about 90 per cent of the building costs. The site will have to be independently valued by an estate agent/ auctioneer/ surveyor.
Mortgage loans on Irish self-build properties are typically drawn down in five stages. The lender will require written confirmation by the architect or construction engineer at each stage. For example when:
- the site is bought
- the floor level is completed (when the foundations are laid)
- the roof level is completed (when the house `shell’ or frame is completed)
- the plastering is complete – completion (this is when the property is described as finished and habitable by an independent valuer).
The final stage payment (completion) will only be released following inspection by an independent valuer.
A supervising engineer or architect needs to be employed to ensure the building complies with planning permission and to certify the progress of the build to the lender.
It is important to choose a good architect and a good builder. Adhere to contract prices for the building work, and add some margin to the estimates to avoid cost over- runs. Your architect or engineer will advise you on this.
They typically add about 10 per cent for unforeseen extras.
If cost overruns do occur most lenders are reasonably flexible about approving further advances, as the property’s value on completion is normally significantly higher than the cost of building.
Buildings insurance and life assurance will need to be in place from the beginning of the project.
Borrowers typically have to make repayments on their mortgage long before they move into the property. However, the repayment burden can be eased by opting for interest-only for a limited period, or opting for a deferred start on mortgage repayments.
Self-build properties usually involve more work and hassle (typically from delays) than buying a ready-built property. However, the benefits usually outweigh the disadvantages. You own a home designed to your individual preferences, possibly close to family and friends, and worth considerably more than it cost to build. Being aware of the pitfalls probably halves the work and stress involved.
For further information or to make an application for a self-build mortgage, contact: Mortgage Plus, Ireland’s leading mortgage broker on Lo-call 1890 780 780 or make an online application via their web site www.mortgageplus.ie