Buiding new house - using old house as collateral

V

Voodoo

Registered User
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Hi all,

I have a strange (or maybe not so strange) question to ask.

We are current house owners having bought over 7yrs ago. We now have less than €150k left on our mortgage and our house is valued in the region of €280-290k.

Ideally, what we would like to do is build a new house to move into. We have no "real" savings - maybe a couple of grand, but wanted to see what options we have. What we would like to do is to maybe move our mortgage to a different provider and to release equity in what we currently have to purchase the site/assist in building the house.

In looking at options on size of mortgage we could get, it would appear we could get a 400k+ mortgage.

My question is can we use our house as collateral in order to get a mortgage to purchase the site (looking at a site valued at 180k) and to build a 2800sq ft house (rough cost of €250k) on this site.

As we have 2 children, we would like to remain in our house as long as possible without having to sell it and either have to rent or see if we can move in with relatives (mine or wifes parents) for a while.

I have a meeting with NIB on Friday to discuss, but just wondered if anyone had any comments on it in the meantime anyway.
 
Hi,

We used our house as collateral ie released equity to purchase a site without planning - we did get full planning. However having built a house previously and planning to build another - allow about 20% to finish off house - www.myhome.ie has some pointers regarding building. Basic landscaping outside can also cost - so factor in all this costs. It is a good time to build - always overestimate rather than underestimate and don't leave yourself short.
 
In relation to your question on releasing equity in your current property it is possible to do what you are trying to do

There are 2 methods that I have seen used, One is either to remortgage your current property in full by taking over the amount of the outstanding facility and also releasing equity to facilitate the site purchase & build if so desired. Depending on where this leaves you from the perspective of LTV you may not be asked to account for what you are using the additional monies for.

Alternatively if your current mortgage provider offers the option you can take out an equity release loan which runs parallel to your current facility. This loan tyoe allows you ro release the equity in your property, again to a certain LTV. The difference with this is that you can take this over a shorter term if you wish or in some cases draw it down in stages as you need to money to facilitate the various stages of your build. This flexibility may also suit you from a budgetary perspective as you are only charged interest on the amount of the mortgage loan approved and therefore your repayments will be low as possible for as long as possible

Both of these options are obviously subject ot standard income criteria and qualification

Hope this helps a bit
J
 
Hi Casperb,

I'm for carlow area so not familiar with sites around dublin but needless to say I'd expect land around Dublin area to be expensive even with the downturn in property. If you move further our of Dublin, land prices will be cheaper. With regard to builders, you can either go fixed price for a standard finish or with direct labour. Prices are varying at the moment my part of the country anything from E80 to E100 up to E120 per square foot. First decided on what type of house - bungalow is more expensive to build than 2 storey. Orientate house to south if possible and maximise use of windows there, to the north little or no windows. I hope that helps for our house I have been quoted E102 including vat for basic block build with good u-value add on extras on top of heating, flooring etc. Best of luck,
angela59
 
Voodoo could release about €100,000 in equity from the current home. Anything more than this will need to use the site itself as security. But that's possible too. Many lenders will offer around 75% of a site cost provided that it has full planning permission and you are approved for the total amount (i.e. site plus build).

Liam D. Ferguson
www.ferga.com
 
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