Looking to build, renovate or extend?

You can’t miss the vast amount of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects.

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the building inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment. 

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short-term basis.

Development Finance and Bridging Finance (also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction.  The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other possible options available to you before going down this route.

Self Build, refurbishment or development? There are plenty of options..

As the local area continues to become a virtual ‘new homes exhibition’, there are a number of lenders also assisting customers with more private projects such as development, self-build, or if you just want to upgrade your existing property by way of refurbishment. 

On a self-build, the customer normally buys the land and the lender will issue the funds to build, on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a valuer will review and advise the lender of progress and to enable the release of payments.  You will tend to find the lender will lend on the Gross Development Value (the end value).

On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. They will almost always require a schedule of works – extension plans, kitchen, bathroom, etc. 

The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.  Seek out a local architect to assist you with plans and costs and always make sure you set out accurate budgets from the outset.

Lenders will cater for all types of scenarios (dependant on the exact type of works required!).  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! 

Have you heard of the Tipton Building Society?  What about the Saffron, Harpenden, Principality, Dudley, Furness, Shepshed, or the Stafford Railway Building Societies?  Not necessarily household names, but we are seeing these names and a lot more like them launching innovative products.  Not always looking for huge volumes but looking to fill gaps in the market and this should be applauded.  

A good broker will, in most cases, have a relationship with these types of lenders, understand their requirements and ensure all the correct information is submitted from day one.  There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, highly competitive market place.

Lot's of building work happening!

There is a lot of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects. 

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment.  

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short term basis.

Development Finance and Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction.  The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other channels first!

Increasing number of people look at buying 'projects'

We are seeing an increasing number of people look at buying 'projects'.  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it. Nor if you are intending to purchase a property to let out, but it's currently in an 'un-lettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many lenders now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months.  Others will allow the works to be completed, revalue the property and lend based on the newer property value.  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds.  Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing home.  Either way, the lender who funded the original purchase will need to be advised and made aware of all works as you will be altering their security! If you plan to build your own house (Self Build), the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a surveyor will review and advise the lender of progress and to release payments.  If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value). On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.   Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

My wishes for the year ahead..

I didn't make any New Years resolutions, purely on the basis I very rarely manage to keep them!  But if I were to make a wish list for the mortgage market, it would include Lenders becoming more lenient to the self employed, more lending for First Time Buyers and the over 65's and that we could find more builders! The latter point may not enthuse everyone, especially on a personal front living locally, but the economy undoubtedly needs more house building.

That said, there does appear to be much building work going on locally, mainly by large property developers. In addition, we are seeing many enquiries for those looking to build their own dream home. Many have been enquiring about mortgages to buy a property, knock it down and build a new one in the same location.  These are normally called Self Build Mortgages or Development Projects.  Others are looking at substantially renovating their existing properties.  If you are considering either of these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!   Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment.  For extensions and renovations, it may well depend on the size of the work and what funds are required. 

Some of the lenders in this sector may not be household names.  As many lenders fight for customers business in a tight market, we are seeing some of the smaller lenders offering market leading rates as well as niche products to build up their portfolio and attract new business.  Nevertheless, they are still there to lend and it is always worth shopping around before committing.  Competition can only be good for the end consumer.

Active lenders are not just a household name or brand!

I might even be bold enough to start this week’s column by saying the market has turned a huge corner and is on a substantial climb out of the doldrums!  Wow, what a week it has been.  Competition is rife amongst all lenders, from well known high street names; right through to lenders you’ve never heard of; to those funding commercial mortgages; to those specialising in secured second charges; to those looking at investment properties / buy to lets and to those who offer mortgages for complex scenarios that need a little thinking about, outside of the box.

Rates are reducing all across the market and headline grabbers are now sub 2% for a two year fixed and around 2.7% for a five year fixed.  T&Cs apply obviously, but watch out for the fees.  They range from £1,500 to £1,999 and although the rates are great, they might not be the best in the market, if priced over the term period.  For example, a slightly higher rate, with lower fee and free remortgage package (free valuation and solicitors) might work out more cost effective over the same period.   Always review the APR, the rate your mortgage reverts to after the promotional period and always seek professional advice. 

Active lenders are not just those with a household name or brand.  Many smaller funders / lenders located in various parts of the country have money to lend, and at good rates, if you know where to find them.  So don’t be drawn to a lender just because you know their brand.

With this in mind, figures released recently suggest that lending via Building Societies rose 30% in 2012 with net lending of £6.5bn.  And it’s not just for those with a large deposit as almost half of the sectors lending was against 75% of the property value and above.  In addition, Building Societies are more flexible than banks and can manually assess cases, taking a view of the whole scenario rather than a tick box decision.  First Time Buyers, Self Build, Shared Ownership, Home Movers, Buy to Let, Credit Repair and Let to Buys, are just some of the active areas for such institutions. 

Build your 'Dream Home'!

We’re in the midst of a rate price war between lenders vying for new customers.  This is obviously great news for the end consumer, but it can’t be profitably sustainable for these lenders, so make hay whilst the sun shines, as they say!   Just be wary that lenders are ‘cherry picking’.  You may be drawn to a superb rate and approach the lender directly, but for whatever reason, they decline your application and offer you a higher alternative or nothing at all.  We’re hearing numerous differing stories from customers currently, and some are quite disturbing.  Especially if the lender has pulled the plug a number of weeks in to processing..

Don’t get me wrong, we are in a very positive era and enjoying a very busy start to the new year.  However, you need to be aware that these things happen and that they can happen at any time right up to the completion of your mortgage! 

There appears to be a lot of building work going on locally, mainly by large property developers.  In addition, we’re seeing a lot more enquiries for those looking to build their own dream home.  Many have been enquiring about mortgages to buy a property, knock it down and build a new one in the same location.  It can be done and these are normally called Self Build Mortgages.  Others are looking at substantially renovating their existing properties.  Again, this can be done.  Either way, have a chat with a local architect first to see if your plans are realistic possibilities.  They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!   Lenders then may look to lend funds on a stage payment basis.  Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector and then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a deposit and possibly at each stage.  For extensions and renovations, it would depend on the size of the work and what funds may be required.   Seek professional advice.