Building a house and applying for a mortgage

B

bragan

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I'm hoping to build a house, and I'm a little confused about how to go about getting a mortgage. If you don't know the total cost of the house, how do you apply for a mortgage, and how does the bank estimate the value of the property?
I understand that I should get quotes for all aspects of the building, and apply for a mortgage that is above the total. If I don't need all of the mortgage will the bank charge me? And how do they work out the % I'm borrowing? Say I borrow €300,00 which is 90% of the value of the house, but only actually use €250,000, which is 80% of the value of the house, would they give me a cheaper rate?

Sorry for the messy post, but I'm confused. It would be so much easier to buy a house...at least then you know the cost in advance!!
 
As you say, get estimates for the build, add a percentage for over-runs and apply for a mortgage for this amount. You'll only get charges for the amount you actually draw down.

The rate will generally be determined by the amount you apply for. If you draw down a lesser amount, it may or may not qualify you for a lower rate with the lender. It depends on what lender you're going with and what their bands are. If you happen to draw down an amount that brings you into a lower band, you can go back to your lender and ask them to give you the rate determined by the lower band.
 
Thanks.

Does the bank include the value of the site in the value of the property, and if so, do they get an independent party to value the site?
 
They will ask you to get a professional valuation done by one of the companies from their recommended list of valuers. Cost around 130€
 
The value of the site is included in the overall property value. Most lenders like to keep the loan below 90% of the total site value plus build costs.
 
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