Self-Build Mortgages

Are you looking to build your own home? Then a self-build mortgage is the recommended facility for you.

Self-build mortgages have strict lending criteria that you should be aware of. Broadly speaking, lenders would be more inclined to grant you a loan if you are able to secure a deposit of at least 20% of the home’s market value upon completion (10% for first time applicants), be in secure and permanent employment and constrain costs of facilities within 3.5x of your gross annual income.

Note that lenders will not release any funding to you until planning permission is in place. They will not contribute towards the cost of obtaining planning permission.

Lenders will not fund your connection to and installation of essential services e.g water

In general, lenders will grant up to 80% of the market value of the home OR 100% of the costs of completion (whichever is lower)

Where the site on which the property is being built is financed as part of the transaction, lenders will accord up to 80% of the site cost and up to 100% of the construction cost OR up to 80% of the value in repair figure (whichever is lower)

A timeline for the process of obtaining a self-build mortgage is outlined below. Note the discrepancies between it and a normal mortgage taken out for a ready-built property:

1. Do your research and apply: Prior to applying for a mortgage, ensure you have taken into consideration the size of your budget and the additional costs associated with constructing a property (planning permission, legal fees, moving costs etc). Additionally, you must account for the day-to-day expenses you will incur once you move into your new home (utilities, TV, insurance etc). You can use our free mortgage calculator to get a preliminary estimation of how much you can borrow. Once this is done, it will be easier for you to work out the size of the mortgage you require. You can then come to us and we will assist you in submitting your application once all due diligence is carried out (selecting the most favourable interest rate for you, analysing all conditions and clauses set out by the lender, comparing different incentives offered etc).
2. Provide supporting documentation: The lender will need evidence that you can meet your mortgage repayments so you will have to give them access to your bank statements and end-of-year income tax returns. This will assist them in deciding on the outcome of your application. They will also need details regarding your site and evidence of planning permission. Most lenders require an Ordnance Survey Ireland or Property Registration Authority style site map to judge the feasibility and magnitude of the build.
3. Obtain Approval in Principle: Once you have secured your deposit or your site (which can act as the deposit), the lender will provide you with an Approval in Principle if they deem your application successful. Essentially, this an indication of how much you can borrow. It stays valid for 6 months, period during which you should have enough time to go house hunting.
4. Provide requested documentation and receive offer: The letter of Approval in Principle will list certain documents that you need to provide your lender with so that they can proceed with your application. Once they are satisfied everything is in order, they will issue you with a loan offer letter that you should review with us and your solicitor. You and your solicitor must sign this letter and send it back to the lender.
5. Begin the build: Once you have your offer in the bag, you can then start building the home of your dreams! Each phase of the build is funded through different stage payments until your home is complete. Note that you only pay interest on the amount drawn down at each stage, not on the whole mortgage. A general overview of the stage payments available is given below. (Once again, this list is not a definitive one and each case requires unique considerations)
   1. 1st stage payment - Site purchase
   2. 2nd stage payment - Demolition, site preparation and foundations
   3. 3rd stage payment - Floor Level certified by your assigned certifier and requested through your solicitor
   4. 4th stage payment - Roof Level. The shell or frame has been built
   5. 5th stage payment - Finished property. Plasterwork has been completed and the property is habitable
   6. 6th stage payment - Post completion. Final valuation and Certificate of Compliance issued

*Each stage must be certified by your assigned certifier and requested through your solicitor*

Source: Self Build Mortgages - Self-Build Mortgage | permanent tsb