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How to finance this self build project
Hi, we have a patch of land in the family that my parents own that there is a possibility of gaining planning permission to build a family house in the countryside. We through the sale of our house would have the finances to develop the plot potentially without the need to use any additional borrowing, at the end however we would need to mortgage the house to pay my parents back for the value of the land. Would this be possible and are there any issues other than CGT that we might need to be aware of.
Answers
Yes you can absolutely take this route – although it’s important to know that some lenders would require the property to be lived in for six months before they allowed funds to be raised against it. In this case, you’d be remortgaging the property (this is the technical term for taking a mortgage out on a property you already own).
As the name suggest, the six-month rule basically means that you have to live in the property for six months before you can progress with a lender for a remortgage. The rule was introduced by lenders to combat money-laundering and tends to be quite strictly enforced. So it’s critical that you do your research on which lenders will offer you this service (or use a specialist broker to undertake the search on your behalf).
As this property will be your main residence, Capital Gains Tax will not be applicable
Rachel Pyne, Buildstore
