Banks 85 Euro per Sq Foot Rule on Self Builds

O

owen

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We plan to build a 2000 Sq Foot House on our own site which is valued at 40K. We have prices for the complete build for 140000 Euro but our Mortgage lender is telling us we should be spending 170000 Euro on the build (85 Euro Sq. Foot) and if we don’t spend that amount they wont give us the loan. Our wages will only allow us to borrow up to 110,000 Euro so we had planed to finance the remaining 30,000 Euro out of savings and selling a car. There is no way we can afford a Mortgage of 140,000 Euro. If we can get the Build done for 140,000 why should we have to pay 170,000 for the same Job? In effect the Bank is saying to the contractors you must charge 85 Euro per Sq Foot for any pricing you do for Self Build Houses. Does anyone know away around this problem apart from us trying to save another 30,000 Euro and wait another 5 Years
 
I don't think that is what they are saying. The bank is trying to make sure you have sufficient to finish the build and in their estimation that is 170k, practically every self build runs over budget and the problem then is trying to get the extra money to finish the work. Bank don't want mortgage on unfinished house with you unable to borrow the money needed to finish. Happens all the time which is probably why the bank have this rule in place. Unfortunately in your case you don't have the borrowing capacity for the extra, normally you could just apply for the 170 and if it only cost you 140 then that is all you had to draw down but at least the option was there if it ran over.
 
You could take the money and then make an immediate capital repayment of the excess back as soon as the mortgage drawdown is complete?
 
I'd imagine the 140K quote is for builders finish only? If so then it will easily cost 170K to finish the house to a reasonable standard, so I'd agree with the bank here.
 
A lot of bull being spouted by people about sq foot building costs.

The really low figures are builders finished shells with the cheapest of everything thrown. Self managed by building industry insiders, cash jobs and bartered labour.

Banks , quite rightly don't want that crap, it's their money and they want completed houses as security
 
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