Luckily we had proceeds from the sale of another house to pay for this house to be built - but most people building their home in Ireland will probably need a mortgage.
Usually - mortgages for selfbuild properties are more complicated to arrange than loans for a ready-built house.
Just because the house will be worth substantially more than it cost to build, most borrowers think that they can borrow 100 per cent or more of the building cost. But that's not the case - lenders like to keep the maximum loan to value below 90 per cent of the value of the site and building costs combined.
Planning Permission :If the site has to be purchased, lenders will not consider your mortgage application unless planning permission has already been granted.
Gifted Sites : If the site has been `gifted', say from a parent to a child most lenders will approve up to 100 per cent of the building costs.
Buying a site: 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. The site will have to be independently valued by an estate agent/auctioneer/surveyor.
After that the lender usually approves about 90 per cent of the building costs.
Some lenders are supposed to be better with self build : Permanent TSB, EBS, ICS and IIB Homeloans are said to be keener than AIB and Ulster Bank.
Draw Down : Mortgages on selfbuild 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.
Tips .
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. .
