Self build mortgages are mortgage facilities arranged for individuals building their own home. This mortgage category encompasses both direct labour construction and houses built by contractors under a building agreement.

Mortgages.ie has vast experience in the provision of self build mortgages. Building one's home is not for everybody but, in almost all circumstances results in lower house purchase costs when compared to a ready-built house. The process generally takes considerably longer than anticipated and requires a great deal of planning. Hiring the right professionals is absolutely vital to the success of any project.

We charge a fee of €500 for all self build projects.

The self build process involves: acquiring a site, obtaining planning permission for your house and the construction of the property.

Some lenders do not provide mortgage finance for self build properties. However most lenders will provide self build facilities and mortgage rates are the same irrespective of the construction format. Lenders in general are reluctant to advance traditional mortgage facilities where the site in question exceeds what can reasonably be described as a house plot.

We set out below a number of key issues that arise in relation to self build mortgages:

The first step in the process is to establish what you can afford and get approval for the cost of your development.

Lending criteria for self builds is strict.

Lenders have had poor experince in the self build area with many houses left unfinisheed due to inadequate budgeting or problems with employment etc.

As a guide lenders are happier when the following factors apply

• Facilities required do not exceed 4 times gross income
• You have savings (cash) of around 10% of the value on completion.
• Employment must be permanent and secure
• Self employed applicants are finding securing mortgage approval to be very difficult at the moment.

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The next step is to talk to an architect or building engineer in the area in which you intend to build and establish an approximate site and building cost within the constraints of your borrowing capacity. Always look for approximately 20% more than the estimated costs.

When purchasing the site the bank will issue a formal loan offer where the client has an idea of the cost of the site and his budget is set out, but the lender will condition valuation, estimates, architects letters & qualifications, planning permission.

Banks will not issue any funding until all of the conditions are met and full planning permission is in place.

Lenders will advance up to 90% of the cost of buying the site and 100% of the building cost.

The overall finance level on completion should not exceed 92% of the value of the completed property. As in almost all instances the value will be well in excess of the site and construction costs, this condition is usually easily satisfied.

The next important decision is to decide how you will build your home

Direct labour

In these circumstances the client, under the supervision of an appointed architect, manages all the various elements of the build from sewerage and drainage and foundations right through to plastering and fitted kitchens. This is a difficult undertaking and requires great dedication and control to ensure the smooth running of the project.

Building contract

Again the house is built under the supervision of an approved architect but in these circumstances the work and management of the project is subcontracted in full to a builder. Generally a builder is chosen following a tender process organised by the architect.

In both circumstances the key ingredient to choosing all concerned, from the architect, to the direct labour individuals is your satisfaction with their ability to deliver the products and services they claim in a professional and efficient manner. The easiest way to ascertain this is to ensure you employ experienced reliable people and that you thoroughly check out and record all references.

Self build mortgage issues

Lending criteria

When assessing a self build credit application lenders will apply the same lending rules to a self as they do with a straight house purchase. Basically they need to satisfy themselves that you can comfortably afford the mortgage repayments. Please review the documentation required and also checks out your estimated borrowing capacity using our "how much can I borrow" calculator.

Paying for the site

The first stage is the funding of the site purchase .The site must have outline planning permission and as a guide the maximum funds available at the outset available is 90% of the site purchase price. This may be increased to 92% on completion of the house subject to valuation.

Stage payments

Funds are drawn down in stages by your solicitor so that money is available to the builder or in respect of direct labour during the construction phase.
No funds will be advanced by a lender out unless the stage of development has been certified by a suitably qualified architect or engineer.
At the outset the lender will satisfy himself with regard to the qualifications of your appointed architect .This process involves the lender requiring the architect to issue a letter setting out their qualifications and professional indemnity insurances arrangements.

Planning costs

Lenders are also happy to cover planning and other related costs at the end of the construction phase subject to overall costs coming within the limits specified above.

Construction insurance

Special buildings under the course of construction insurance is required during the construction phase and this is a matter your architect will advise you on.

Be prepared for the unexpected

The importance of project planning cannot be overemphasized in a self build project. You need to be involved from the start and take a hands on approach. If you are building jointly with your partner you should, at the outset, clearly decide which one of you is taking prime responsibility for the build.

This is a truly rewarding experience when its all over but it will test the nerves of the coolest among us!

If you would like to talk to an advisor about Self Build mortgages, please get in touch.