Financing new build

My husband and i plan to build a house in the area that i am originally from in the next 2 years. We currently own a house value 240k, mortgage outstanding 340k, monthly repayment 1100. We can let the house for 900pm.

My income is 90k and my husband is out of work. He was made redundant 6 months ago and is currently minding our 2 young children, so no childcare fees at present (was 1500 pm). We have savings of 200k and no other loans.

Site cost is 60k and build is approx 260k. My plan was to buy the site soon and start the build with our savings, then approach the bank later for finance for remainder. Is this the best way to proceed? Will the bank give us mortgage for shortfall of 120k given that we have large mortgage already? Also will my husband's unemployment be a major issue? Obviously this may change by the time we look for finance. Should we contact the bank now or wait till we are halfway through the build? We are planning to use a builder.

the bank will make you buy the site in any event and then they would look to finance the build. You might want to be careful if you have a tracker rate on your existing mortgage as they may look to take it away if it is no longer going to be your pricipal private residence. If you are going to be providing 140k of the 260k of build value i would be supprised if you did not get a mortgage but the negative equity on the existing house is of course an issue.I would personally talk to them now as you dont need to add further pressure to the build at a late stage if you were to come across a problem. Better the devil you know and all that.very best of luck with it and hopefully it works out well.

I'd involve the bank from the start as some banks are reluctant to lend on part-built houses. In any event, make sure you have an architect or engineer supervising the build from the start as banks will look for certificates confirming that the house has been built according to regulations at every stage.

Totally agree with above replies, much harder to get mortgage on half built house, get approval before you start, you don't have to draw it all down immediately.

Purchase the site for 60K which will reduce your savings to 140K. Then you will have two choices of what to do with the 140K. Bring your existing mortgage down to 200K or else build a portion of the next house on the site.

Lets say you build and let the other house pay away for itself. You are going to be short 120K if you build. Will the bank lend 120K to you to finish a house if you are already mortgaged to 340K even allowing for rental income. That would create a total liability of 440K. Depends on your husbands work I guess.

What is the long term option for the original house. Do you wish to keep it long term as a rental property, or do you intend selling?

My suggestion is that you pay 100K on PPR so you have no NE and you sell it and rent. Currently you can afford mortgage of 1100, if you can rent for less than that you can make more savings. (people have been known to live in mobile homes for the duration of a build, or move back in with mom & dad). Meanwhile you buy the site for 60K. Then with 100K you approach the bank for 140K. On a salary of 90K this should not be too much of a problem for the banks, depends on your employment situation, (check the bank out on this now to see if it's feasible) but the fact your OH is childminder is positive in this regard because it increased disposable income.

Not to rain on your parade but I've yet to see anyone stick to their building budget. And please tell me you're not building another Irish McMansion for 4 people in the middle of nowhere that is impossible to heat.