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From Stacking Bales to Stacking Blocks in the Front Field
All your ducks seem to be lining up nicely - you have your dream home in mind and have been gifted your favourite field on the farm to build it. But where to next? Bernadette O’Shea, AIB Homes Advisor shares some of her experiences to help make this dream a reality.
How much can you borrow?
There are many elements that need to be considered when making the decision to build your home, but probably one of the first actions that I would encourage is to organise an initial review with an AIB Homes Advisor to discuss your different loan options and how much you may be eligible to borrow. At least then you will be able to assess whether it’s aligned with your planned design spend.
The eligible loan amount is dependent not only on your income but more importantly how much of your monthly income is available to meet loan repayments after personal and business financial commitments are accounted for.
Does the site for a self-build count towards your deposit?
Another key consideration (from the Banks perspective) is how much equity you have available to put into the loan proposition. If you own or are gifted a site, the good news is that this can act as your input/deposit. We can then offer up to 100 per cent of the construction costs as long as the value on completion of your home does not exceed 90 per cent for First Time Buyers (FTB) or 80 per cent for all others. This is in line with the Central Bank rules. If you are purchasing the site we can also take this into consideration. We recommend you engage with your Solicitor as to the point of gifting the site and the implications under Gift & Inheritance Tax.
What is the Help to Buy scheme?
The Help to Buy incentive helps first time buyers who are buying or building their own home to pay their mortgage deposit by giving them a 5 per cent tax rebate based on the value of their home (up to a maximum of €20,000). First time buyers building a new house with a mortgage that’s a minimum of 70 per cent of the house valuation can qualify. The first step is to apply for the tax rebate on revenue.ie to establish your maximum relief.
It should be noted that under the current scheme, an initial stage payment will need to be drawn by 31/12/2019. There is no indication the scheme will be extended.
Is the loan application process more complicated for self builds?
The actual loan application is assessed in the very same way as a purchase of a property, but there are some additional steps and information required. For a loan offer to be issued, you will need to show you have secured full and final planning approval (Grant of Permission) and submit detailed costings drawn up by a suitably qualified architectural designer or engineer with professional indemnity insurance.
Make sure you have your research done and know what your outlays are going to be, from professional fees, including your solicitor, to council levies that need to be paid upfront or water connection fees. The loan is then paid out in stages; your design professional must sign off on each of these stages to say they are complying with the building regulations before the stage payment can be issued.
One of the major differences between a standard mortgage and a self-build mortgage is the way the money is released. With a standard mortgage, the funds are released in one go, whereas with a self-build mortgage the funds are released in stages throughout the construction of your house. You only make repayments on the amount you draw down at each stage.
Fixed price contract or direct labour?
Understand the difference between going the direct labour route versus a fixed price contract and the pros and cons of each. It’s more costly to go with a contractor but it’ll be project-managed for you and more likely to be delivered on time. If you go direct labour you will need the help of a qualified architectural designer or engineer to guide you.
Managing the budget, keeping receipts and reconciling the spend along the way is vital as is getting the right insurance to protect your construction at the very start, as some providers may not quote when the build is underway.
Building your own home is a key milestone and monumental life decision that shouldn’t be taken lightly. There are many aspects that need careful consideration so having the right team in place is everything. Do your research and get recommendations from family and friends for your solicitor, engineer, architectural designer, builder and any tradesmen you might need and most importantly your AIB Homes Advisor who will help you realise your dream home in the field you played in as a child.
Please be aware that all of the views expressed in this Blog are purely the personal views of the authors and commentators (including those working for AIB as members of the AIB website team or in any other capacity) and are based on their personal experiences and knowledge at the time of writing.
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Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. Copyright Allied Irish Banks, p.l.c. 1995.