The self-build mortgage: the DIY approach
A self-build can be daunting but armed with the right support it can lead to your dream home
There are a couple of ways to manage a build project and this may be influenced by the type or scope of the build
Building your own home gives you a huge amount of flexibility - it lets you choose a design that precisely suits your needs now and into the future. You can decide on layout, room sizes and design features to suit your budget.
A self-build mortgage is a mortgage tailored to customers who are looking to build their own home or who are extensively renovating a property - where you can’t immediately put your key in the door. Unlike a standard mortgage, a self-build mortgage is typically drawn down in stage payments, spread over up to 18 months depending on the length of the build period.
How much money can I draw down for my mortgage?
Maximum mortgages are generally 3.5 times gross annual income and 80 per cent of the property value (90 per cent of the property value up to €220,000 for first-time buyers). In the case of a self-build, the property value is typically calculated as either the site purchase cost (if applicable) plus build costs or the final valuation upon completion. Typically, the lower of these two figures applies. It is also prudent to have an extra 10 per cent of the total cost to cover unforeseen expenses, contingences, cost overruns and furnishings.
Do I need to have building expertise? Or can I just be a fan of Grand Designs?
You don’t need to have building expertise to apply for this mortgage. There’s a couple of ways to manage a build project and this may be influenced by the type or scope of the build. You may decide to employ a Building Contractor or Project Manager / Structural Engineer to coordinate the project, or you can choose to take on this role yourself. Taking on the role will save you money but be prepared to devote a significant amount of time and energy to the project.
What do you need to provide to the bank to make the application?
There are a number of important documents that you will be asked to provide as part of your self-build mortgage application, in addition to the standard documents relating to your savings, employment and income. Your mortgage advisor will be able to tell you what’s required but here’s an outline.
The key piece of additional information you will require upfront is detail of your build costs - either a fixed contract quotation or detailed costings for each element of the build provided by an architect or building professional. Also required are details of your planning permission - full permission should be in place at the mortgage application stage. Your valuer will need to provide an initial valuation report, and you’ll need an initial report completed by your ‘assigned certifier’ who must be a certified architect, engineer or building surveyor.
Once approved, how does a self-build mortgage work?
Before you commence the build, you will need to appoint a registered architect, chartered building surveyor or engineer to review and certify the works at each stage of the process.
Typically, you will input your savings/contribution upfront to fund the site purchase or the start of the build.
As the work progresses, the architect/chartered building surveyor or chartered engineer will complete Stage Payment Certificates confirming the amount of work that has been completed – your solicitor then requests the funds required from the bank.
When the build is complete the bank will need a final valuation report completed by the same valuer who completed the Initial Valuation Report, together with a Certificate of Compliance - the final stage payment under the mortgage can then be made by the bank.
Where’s a good place to start with regard to planning permission?
Your first stop should be your local authority. The Local Area Plan will outline a strategy for proper planning and sustainable development in your locality, including any planning restrictions. Your planned design may be influenced by your planning authority which means you may have to compromise on some design features in order to obtain planning permission for your build.
How can I keep on top of expenditure?
Make sure you get detailed quotations for all elements up front. When getting costs, make sure you distinguish between an estimate – an educated guess on the basis of an outline you have provided – and a quotation which is a written exact price.
Keep in close contact with professionals managing the build and ensure that any deviation from supply costs or schedule is flagged early so that you can put a plan in place to get back on track.
Helpful information that will inform you on what’s involved is available at the following: Building a house – The planning issues, Planning leaflet 4, is available at Environ. See environ.ie
A qualified architect should certify your building plans. You will find a list of qualified architects at the Royal Institute of Architects in Ireland. See riai.ie
A quantity surveyor can help you with costs and budgeting. The Society of Chartered Surveyors Ireland can help with suggestions. See scsi.ie
The Health and Safety Authority’s Guide for Homeowners – Getting Construction Work Done Safely is another useful read if you’re hiring a builder. See hsa.ie
Here are 10 tips compiled from self-build experience that may be helpful:
- Understand your local council planning requirements and restrictions for your area – you don’t want to have to row back on anything if you find you haven’t complied with all rules and regulations
- It may sound simple, but plan how you’ll finance your build project before spending any money
- Don’t buy any materials until all the planning is finalised
- Make sure you have adequate insurance cover for your site and for the build. Your mortgage advisor can help you with this
- Find out if each tradesperson’s work is guaranteed and insured. Ask to see a public liability insurance certificate
- When getting costs, make sure you distinguish between an estimate - an educated guess on the basis of an outline you have provided - and a quotation which is a written exact price
- Get contracts drafted up for each contractor - include price, scope and timing - and ask your solicitor to review the contracts before you sign
- Make sure that contracted trades people are members of the relevant association and have appropriate certification
- Deal with issues as they arise as it will likely be cheaper in the long run. No matter how small they seem, don’t ignore any issues that come up during the course of the project
- Stay in regular contact with your contractors - keep a record of progress reports, reasons for any delays and photos of the site at different stages.
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