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Submit plansHello!
This is a question about financing plot buying and whether offers should be with a condition of PP obtained.
Here is a scenario. We wish to put in an offer on a plot that has detailed PP for a four bedroom house. We would wish to build a different style house but of a similar size, so would submit a new PP.
We have a mortgage agreement in place. However, lenders will only grant the application and release funds once the PP and architectural drawings for the house that is actually to be built are in place.
This means:
You can't get the money to buy the plot until you have your design and PP in place.
But you can't get the design and PP in place until you know what plot you're buying.
It seems to be a vicious circle
My questions / points:
1) This is surely a very common situation, one that afflicts anyone who both requires a mortgage to help finance their self-build, and wants to resubmit PP for their own design. Yet I can find very little information on what people do in this situation.
2) So what do people in this situation generally do? Do they put in an offer for the plot with the condition of obtaining the PP for the house they want? And if so, this is a process that would take months, involving finalising a design with an architect based on the plot, and then getting that through approval. This very long lead time would surely put most vendors off from selling to these applicants?
3) Or do people separate out the finance required for the plot and the self-build. For example, obtaining a different form of finance for the plot that will enable them to be in a strong buying position when putting in an offer to the vendor. Then separately applying for a self-build mortgage on the plot, after they've designed the house with the architect and had the PP approved?
Our financial situation is we have £200k capital and expect to get around £170k equity out of our current property which we would remortgage to a buy to let. We are looking for plots up to £350k and expect house build costs of around £400k.
Any advice much appreciated - thank you! **
The situation/scenario that you describe below is fairly common, and there are two potential answers.
Firstly in relation to a self-build mortgage Lenders do require a good understanding of the overall proposition – i.e. they need to know what you are planning to build, as they are required to assess the overall viability of the project and your affordability in relation to the project. To do this they need detail such as the estimated completed value of the finished property, and the cost to build your proposed house etc.
If you are planning on amending detailed planning permission then lenders would require to see your new plans. These can be outline drawings but would need to show the proposed footprint and elevations, together with an outline build cost. If you plans were similar in terms of size/type as to what is already there, and is in keeping with surrounding properties in terms of size/demographic then most lenders would be happy to proceed to mortgage offer on this basis. This would allow you to secure the plot and then finalise your design/submit your amended planning and finalise your budget. Alternatively you can as you mentioned offer subject to planning but you are correct in that this lead time will put vendors off, or increase your chance of being gazumped!
Mortgage lenders are not willing to lend on just the plot.
You are in a fortunate position of having both a sizable deposit and a goodly amount of equity in your property so you also have the potential to look at raising capital against your existing property, and putting this together with your existing deposit funds may allow you to purchase the plot outright, (subject to borrowing limits/affordability and status). Following this you can then apply for your planning permission and raise funds via a self-build mortgage for the build (again the amount you could borrow would be subject to affordability and status)