Bridging Loan Self Build?

[pinkcows]

hi..we have plans with 4 weeks to go in, we are building a new house and need about 110grand...we are both self employed and today the mortgage company said they now want 3 months of my wages post covid..i only started again on monday...we dont want to wait another 4 or 5 months..are the bridging loans as bad as they say?? Once built we can remortgage as the house built will be worth 300g..

[bednobs]

"we have plans with 4 weeks to go in"
can u explain that? Is you planning application granted?

[pinkcows]

Sorry yes..half way through..been in 4 weeks, all surveys done has already been in for a preplan..

[bednobs]

do you need to lay out the entire amount at the beginning? if you still haven't got planning, there is a possibility it might be a few months

[Buenchico]

>>> are the bridging loans as bad as they say?

Bridging loan rates currently vary from around 0.5% per month up to 2% per month. So, based upon a loan of £110k, that could cost you between £550 and £2,200 per month:
https://www.money.co.uk/bridging-loans.htm

[The Builder]

Bednobs has already asked my first question. In my experience of doing this, I can tell you that, in the early stages of the build, you shouldn't need anything like the whole 110k to get it out of the ground and on its way.
There's no point in taking out a bridging loan and have it sit in the bank doing nothing for you. As Bueno says, it can be quite expensive.
My first call has always been my Bank. There are various arrangements available for self-build finance. I do it as a business, but it doesn't have to be so for you.

Arrange an overdraft facility. Initially, you take out small amounts. Then, you only pay interest on that amount, not the whole lot.
Cash advances will be staged. As the build progresses, there is more and more value in the property, thus allowing the Bank to release more money, but with increased security for them against the borrowings.

Research the Self-build market. There's a lot of advice available.
Good luck.

[pinkcows]

Sounds more of a plan thankyou! We have 25g already..dont know how much of that will take to get out of the ground?

[bednobs]

do you still need to demolish an existing place? That will take up some time too

[pinkcows]

Yes how did you know this?? Only a week wouldnt it? We already have the demolition money ready too..

[bednobs]

I remember your post about stamp duty.
TBH I have no idea how long demolition and clearance takes but everything ALWAYS taks longer than you expect. I think you might besurprised how quickly the 3 months go and it might work out ok timing wise

[pinkcows]

I know what you mean but dont want to start a build in november really?

[bednobs]

how long are you expecting the build will take? You'll still be doing it over the winter even if you started now wont you?
are you actually "self" building or are you getting buildres etc?

[ubasses]

The rates in Buenchico's link will be for an ordinary property bridgeover. You will probably need a specialist self build lender, the rates are traditionally a lot higher, and don't be surprised when they charge an arrangement fee. If you are not a professional builder you will already be on the back foot., and lenders do not like open ended loans, they will expect a repayment date.
Although the link below says without planning permission, it gives some useful info.
https://www.onlinemortgageadvisor.co.uk/bridging-finance/land-bridging-loans/#without-planning-permission
Although I was in mainstream banking I only had one customer go ahead after having all the costs given to them.

[The Builder]

............... and don't forget to make arrangements with the VAT office for the build.
New-build is zero-rated. You can reclaim your VAT.
Although I reclaim as I go along, you may have to reclaim it later, but do organise this first.