frequently asked questions

Below you’ll find answers to the questions mortgage advisers most commonly ask our broker desk.

LAND, BUILD & PLANNING PERMISSION

With BuildLoan, does my client need to own the land before proceeding?

Your clients don’t need to own the land.  At BuildLoan we can provide funding to purchase the land as well as the build costs for their project.  They can’t just buy the land and leave it though, they do need to progress to build.

If your clients are purchasing land, it will need to have at least Outline Planning Permission (OPP) and you’ll need detailed plans for what they propose to build – as that’s an important part of costing the overall project and the end value.  This ensures that the overall project is viable, fits lending criteria, affordability and for you to determine how much they need to borrow to enable you to advise and submit the application.  You can of course submit a Decision in Principle earlier.

For an extension or renovation project, planning permission may also be required, unless it falls within the parameters of Permitted Development Rights.

 

Can BuildLoan help if the build has already started?

This is a really interesting question, as lots of lenders would say no to this scenario, as they would want to finance the project from the ground up and would decline if the project had already commenced.  

At BuildLoan, we can secure funding for projects no matter what stage they are at.  We appreciate that sometimes self builders will try to go it alone and then realise that they need some help. 

Must my client have site insurance and a structural warranty in place?

Your clients will need to have site insurance in place prior to completion as a condition of their mortgage.  They will also need suitable certification of the build.  This will either be a Structural Warranty or an Architects Certificate.  The arrangements will need to be evidenced before the mortgage commences.

Where the client chooses to have an Architect’s Certificate, rather than a Structural Warranty, the lender will require an additional Technical Audit Inspection at each build stage, in which case Technical Audit fees will also be required.

 

LENDING

How much of their project costs can my clients borrow?

Where the mortgage is to buy land and fund the build – typically up to 80-85% of land price or value and up to 80-85% of build costs too – although it is possible to borrow up to 95% of land and build costs.

If your clients own their land already they can release funds from the value of the land and may be able to borrow up to 100% of their build costs.

What income multiples do you use and how is affordability assessed?

Lenders will assess affordability based upon income, expenditure and the length of the mortgage term.  If we were to calculate the equivalent maximum lending limits, it would equate to between 4.25 and 5 times the applicants’ incomes, subject to affordability.

What is the minimum time self employment is acceptable?

Lenders will generally need to see a minimum of 2 years business accounts for self-employed clients.  There may be occasions where 1 years accounts plus a satisfactory projection is acceptable.

Where the client is a company director, does BuildLoan use share of profit or just salary and dividends?

At BuildLoan, we work closely with our extensive panel of mortgage lenders.  Some will base lending amounts on profits and others will use salary and dividends. From the details that you provide for profit, salary and dividends, we will research and identify which lenders are most appropriately suited to the requirements of your clients.

Are the funds released in stages?

Yes – where your client is building an entire new home, funds will be release in up to 6 stages – linked to the cost of the stage: Buy the land, Foundations, Wall Plate/Frame Erected, Wind & Watertight, First Fix, Second Fix/Completion.  Not all projects fit this pattern, particularly conversion, renovation or extension projects, so we’ll try to tailor the stage releases to your clients’ needs.

What is a cost based mortgage?

A cost based mortgage mortgage is where funds are released based on each stage of build costs, rather than being linked to a site valuation.  This removes the risk of down valuation and your clients receiving less money than expected from the lender.  Cost based mortgages offer guaranteed stage payments irrespective of valuations.  Stage payments can either be in arrears or advance with a cost based mortgage.

What is a valuation based mortgage?

A valuation based mortgage is where funds are released subject to a valuation being carried out by the lender.  This type of mortgage relies on a sufficient uplift in the value of the property at each stage of the build.  Valuation based mortgages carry a risk of down valuation which means your clients may receive less money than expected for the next stage of their project. This can cause serious cashflow problems.

Do BuildLoan's lenders offer interest only during the build?

All of our lenders offer interest only during the build, which often really helps with the clients cashflow and budget, as they will have ongoing living costs during the build period.  When the build is complete, the clients are able to move into their new homes and the mortgage would then revert to a capital and interest, repayment mortgage at that stage.  They will also be able to look at product transfer options at this point too.

Who provides this advice?

You are responsible for the advice given.  BuildLoan will give you all the help, guidance and tools that you need to make the right recommendation in this specialist sector.  Our unique Unicus system will identify which lenders will support your clients’ project and those that won’t making your research comprehensive and your advice – robust.

How much is the procuration fee paid by BuildLoan?

The gross procuration fee paid to BuildLoan for a self build mortgage is typically 0.8% and the procuration fee that we provide to mortgage networks and clubs is typically 0.4o% and 0.35% to directly authorised brokers.  For full details click here.

SERVICE

What does BuildLoan do?

BuildLoan is the UK’s leading provider of residential mortgages for self build, custom build, renovations and home improvements.  We have created unique, exclusive solution based mortgage products, specifically designed to provide the cashflow requirements your clients’ project needs and our end-to-end service is designed to mitigate risk – for everyone involved.   We are totally dedicated to the intermediary market – all products from our numerous lenders are exclusively available through brokers.

 

What types of projects does BuildLoan arrange finance for?

We are specialists in residential mortgages for self builds, custom builds, renovations, conversions and extensions.  We also specialise in short term finance too.  Whether your clients are looking to build their dream home, or build to sell or let on any scale – a single house, a site of houses, offices, apartments or converting offices into apartments – we can help!

 

Do you lend to build commercial or BTL premises?

Yes, we have a dedicated team that specialise in short term finance, whether that’s bridging or development finance.  They are experts to talk to when your clients are looking to build a property/properties to sell on or let, on any scale.

What are the costs associated with BuildLoan mortgages?

BuildLoan’s fees are 

£95 decision in principle fee

£600 payable on issue of the mortgage offer

An Additional Security Fee is also payable to BuildLoan before the mortgage commences – this is an indemnity and build out insurance policy

Other fees 

Lender application, completion and valuation fees will be payable – specific to the product chosen

Re-inspection fees will be payable were the lender requires inspections by their valuer during the build.  These are likely to vary between £50 and £125 per inspection.

Where your client chooses to have an architects certificate rather than a structural warranty, the lender requires an additional technical audit inspection at each build stage, in which case technical audit fees will also be required.  Where a structural warranty is in place, these fees do not apply.

 

What are the timescales from DIP to offer with BuildLoan?

The process is likely to take longer than purchase or remortgage applications, as lenders require more details such as plans, planning permission, project costings and so on. 

As a rough guide, it will typically take between 6 – 12 weeks to receive an offer, although the time can be less than this as it is dependent on how quickly we receive the information needed to prepare your case for the lender and the lender service levels too.

What is BuildLoan's Additional Security Fee and how is it calculated?

BuildLoan’s unique Additional Security Fee Benefit Scheme and Build Out Cover is an insurance policy that allows our lenders to lend more to your customers earlier in their build, irrespective of valuations.

The Build Out Cover provides the lender with the safety blanket, that if they had to take a part built property into possession, they have the option to build out the property and therefore increase their certainty of sale without financial loss.

The indemnity policy also allows the lender to be more fluid with their stage releases, allowing them to offer higher loan to cost lending limits and tailor your clients’ cashflow requirements, providing guaranteed pre-agreed stage releases and the option of advance or arrears stage payments.

The cost of BuildLoan’s Additional Security Fee is calculated based on the amount that exceeds the lender’s normal limit – the insurable risk.  It is therefore a sliding scale, from £0 to around £000 depending on your clients’ requirements.

The average cost for the additional security fee is £1060 for an arrears stage payment mortgage and £1600 for an advance stage payment mortgage.  These figures are estimates and the actual premium payable will be calculated and provided once the build costs and proposed pattern of stage releases have been agreed with you and your client.

Who provides this advice?

You are responsible for the advice given.  BuildLoan will give you all the help, guidance and tools that you need to make the right recommendation in this specialist sector.  Our unique Unicus system will identify which lenders will support your clients’ project and those that won’t making your research comprehensive and your advice – robust.

How much is the procuration fee with BuildLoan?

The gross procuration fee paid to BuildLoan for a self build mortgage is typically 0.8% and the procuration fee that we provide to mortgage networks and clubs is typically 0.$% and 0.35% to directly authorised brokers.